Recent Zealand leads losses in Asia-Pacific markets ahead of rates of interest decision
Markets in Recent Zealand led losses within the region as investors await the central bank’s rate of interest hike decision on Wednesday. The S&P/NZX 50 Index was trading 1.76% lower, in contrast to most Asian markets on Monday.
This comes after the country suffered a series of natural disasters over the past three weeks, including flash floods in Auckland and Cyclone Gabrielle hitting North Island.
Amongst 25 economists polled by Reuters, 20 expected the central bank to boost its policy rate by 50 basis points next week to five.25%.
In November, the Reserve Bank of Recent Zealand said rates of interest must “reach a better level, and prior to previously indicated, to make sure inflation returns to inside its goal range over the medium term.”
— Lim Hui Jie
South Korean and Japanese defense stocks mixed after North’s missile launch
Defense stocks in Japan and South Korea are trading mixed after North Korea launched two short-range ballistic missiles off its east coast on Monday.
This comes after an earlier launch where the North fired an intercontinental ballistic missile into the ocean on Saturday off Japan’s west coast, which led to the U.S. holding separate joint air exercises with South Korea and Japan on Sunday.
South Korean aircraft engine producer Hanhwa Aerospace is trading 1.13% down, but aircraft manufacturer Korea Aerospace is up 0.44%.
Other firms like weapons manufacturer Firstec and Victek, which makes a speciality of electronic warfare systems, have risen 1.48% and 1.99% respectively.
In Japan, Kawasaki Heavy Industries, which mainly manufactures aircraft for Japan’s Self-Defense Forces, rose 0.66%, while pyrotechnics firm Hosoya Pyro-Engineering traded 1.10% up. Then again, Mitsubishi Heavy Industries traded 0.33% lower.
South Korea’s foreign affairs ministry has also imposed sanctions on nine entities following the launch, including two Singaporean firms, saying that they “contributed to the evasion of sanctions” on North Korea.
— Lim Hui Jie
China leaves loan prime rates unchanged
The People’s Bank of China left its 1-year loan prime rate unchanged for February at 3.65%, the central bank said in a release on Monday.
It also left its 5-year loan prime rate unchanged at 4.30%, widely in step with expectations.
The offshore yuan traded at barely stronger levels at 6.8736 against the U.S. dollar after the announcement.
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China largely expected to carry loan prime rates
The People’s Bank of China is basically expected to make no changes to its 1-year and 5-year loan prime rates later today, based on a Reuters poll.
21 our of its 27 respondents expected the central bank to carry the rates, while 6 of its economists called for a marginal cut for the 5-year rate.
Economists pointed to the newest government data showing recent loans having jumped to a record 4.9 trillion yuan ($713B) in January.
A recent statement from the central bank had also reiterated its pledge to strengthen financial support, though with an emphasis on targeted measures.
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Week ahead: FOMC minutes, RBA, Bank of Korea, Xi speech
Listed here are the key events investors within the Asia-Pacific shall be watching this week.
The U.S. Federal Open Market Committee will release minutes for its latest meeting concluding Feb. 1 later within the week.
On Monday, China will release its 1-year and 5-year loan prime rates for February. Malaysia will report its trade data later within the day.
On Tuesday, private surveys will release Australia and Japan’s purchasing managers’ index readings. U.S. can even release its PMI and Recent Zealand is slated to publish its producer price index for the fourth quarter.
Investors can even be closely looking ahead to minutes from the Reserve Bank of Australia’s latest rate decision meeting.
Japan can even release its producer price index on Wednesday. Australia’s composite leading index for January and the nation’s wage price index for the fourth quarter shall be published on at the present time as well.
Recent Zealand can even release its trade balance for January on Wednesday.
The Bank of Korea will announce its rate decision on Thursday morning. Economists polled by Reuters predict to see the central bank pause and leave its benchmark rate of interest unchanged. Singapore’s consumer price index for January shall be released as well.
Chinese president Xi Jinping will reportedly be delivering a ‘peace speech’ on the one-year anniversary of Russia’s invasion on Ukraine, based on Reuters.
— Jihye Lee
Leading indicators down 0.3%, still indicating recession ahead
Forward-looking economic data continues to be pointing to a recession ahead, though perhaps less so, The Conference Board reported Friday.
The board’s Leading Economic Index registered a decline of 0.3%, in step with market expectations and at the very least on relative terms higher than the 0.8% slide in December. On a six-month basis, that puts the LEI down 3.6%, in comparison with the two.4% contraction over the previous period.
“While the LEI continues to signal recession within the near term, indicators related to the labor market —including employment and private income — remain robust up to now,” said Ataman Ozyildirim, the Conference Board’s senior director of economics.
“The Conference Board still expects high inflation, rising rates of interest, and contracting consumer spending to tip the US economy into recession in 2023,” he added.
—Jeff Cox
Market’s lack of response to inflation data may suggest a shift
“Markets have settled following a powerful begin to the yr, though the dearth of a response to inflation data or “excellent news is bad news” mentality suggests a dramatic shift within the complexion of markets relative to last yr,” said Mark Hackett, chief of investment research at Nationwide in a Friday note.
He added that Friday’s trading will determine the week’s overall direction – the S&P 500 is comparatively flat on the week.
“Leadership has shifted to the risk-on asset classes, with technology and small caps leading, and the Dow underperforming the S&P 500 this yr by the biggest gap since 1934,” he said. “Bond investors, nonetheless, remain reactive, with the 10-year Treasury yield up 0.16% this week to three.90%, the very best level since November.”
The shift is sweet news for bulls, who’re taking a look at a narrative backed by a stronger economy than expected and a market that is less reactive to the economy, inflation data or rising rates.
—Carmen Reinicke
Fed’s Bowman says ‘quite a bit more progress’ needed on inflation
Federal Reserve Governor Michelle Bowman said Friday there’s still much work to be done before policymakers can feel they’ve inflation under control.
“I feel there’s an extended solution to go before we reach our 2% inflation objective and I feel we’ll must proceed to boost the federal funds rate until we see quite a bit more progress on that,” Bowman said during an appearance in Tennessee, based on Reuters
The remarks come a day after regional presidents James Bullard of St. Louis and Loretta Mester of Cleveland said they advocated for a half-point rate hike on the last meeting, relatively than the quarter-point move eventually approved.
Data this week has indicated that after abating in recent months, inflation is moving up again.
“We were seeing some progress in lowering inflation at the top of last yr, but among the data that we’re seeing early this yr just isn’t tracking with consistently lowering inflation in a way that I would love to see,” Bowman said.
—Jeff Cox