By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
A dramatic escalation in U.S. political tension and violence looms over world markets on Monday after the attempted assassination of former President Donald Trump on Saturday, with Asian assets the first to show what the impact – if any – will be on trading and investing.
If the shooting strengthens Trump’s election hopes, analysts reckon so-called ‘Trump-victory trades’ could include a stronger dollar and a steeper U.S. Treasury yield curve. Bitcoin was up 4% at $60,000 early in Monday’s global session.
Even before Saturday’s violence, there was no shortage of meaty issues for investors in Asia to get their teeth into on Monday – from snowballing U.S. rate cut expectations to suspected Japanese FX intervention and a deluge of economic data from China including second quarter GDP.
Last week’s surprisingly soft U.S. inflation can keep the ‘risk on’ flame burning if U.S. bond yields, implied rates and the dollar all ease. Rates traders expect the Fed to cut rates by 75 basis points this year, starting in September.
But if that’s being driven by weakening growth and a softer labor market, exuberance will be consumed by caution, especially with the Q2 U.S. earnings season getting underway.
Asia’s calendar on Monday is dominated by the June ‘data dump’ from China as Beijing releases house price, industrial production, urban investment, retail sales, and unemployment figures for last month, and Q2 GDP.
Analysts and investors have set their expectations low.
Asia’s largest economy is expected to have expanded 1.1% from the January-March period, resulting in year-on-year growth of 5.1%. Both would be down from prior readings of 1.6% and 5.3%, respectively.
China continues to struggle with a prolonged property crisis that has curbed investment, soured consumer confidence and demand, and kept alive the specter of deflation. Trade, bank lending figures and key money gauges last week darkened the gloom further.
China’s central bank, meanwhile, is widely expected to leave the interest rate on its one-year medium-term lending facility loan unchanged at 2.50% on Monday.
Japanese markets are closed for a holiday on Monday but the yen will be traded across the continent, going into the session near a four-week high against the U.S. dollar following its rise on Friday.
Japanese authorities remain tight-lipped on whether they intervened last week. But the yen’s sharp rally and daily Bank of Japan money market balance projections strongly point to official action, analysts say.
The yen had languished at 38-year lows around 162.00 per dollar last week, but goes into Monday around 157.90 per dollar.
Does the short covering rally have more juice in it? Probably – hedge funds are holding their largest net short yen position in 17 years, U.S. futures market figures show.
The surging yen triggered a 2.4% slump in Japanese stocks on Friday, its steepest fall since April. Having hit a record high above 42,000 points on Thursday, it could have more room to fall.
Elsewhere in Asia on Monday, India’s wholesale price inflation is seen rising sharply to a 3.5% annual rate in June from 2.6% in May.
Here are key developments that could provide more direction to markets on Monday:
– China ‘data dump’ (June)
– China GDP (Q2)
– India wholesale price inflation (June)
(Reporting by Jamie McGeever; Editing by Diane Craft)
