Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Financial conditionality

Published 12/01/2022, 04:48 PM
Updated 12/01/2022, 04:51 PM
© Reuters. FILE PHOTO: Passersby are silhouetted as they walk past in front of an electric stock quotation board outside a brokerage in Tokyo, Japan October 18, 2022  REUTERS/Issei Kato

By Jamie McGeever

(Reuters) - A look at the day ahead in Asian markets from Jamie McGeever.

Asian markets close the week on a solid footing, which is how they may well round off the year if financial conditions - global and local - remain as supportive as they are right now.

The dramatic reaction in U.S. markets to Fed Chair Jerome Powell's speech on Wednesday afternoon will likely continue to fuel risk appetite across Asia, a move that could get extra impetus from South Korea on Friday.

Annual inflation in November is expected to fall to 5.1% from 5.7% in South Korea. That would be the lowest since April this year, more than a full percentage point down from July's peak, and a sign that the Bank of Korea may soon end its rate-raising campaign.

Evidence that inflation is definitely coming down in one of the continent's most important economies would be welcome news for regional stocks, which are coming off the back of an extraordinary month.

The MSCI Asia ex-Japan index rose a staggering 17.4% in November, its best month in 29 years and the second best since the index was launched in the late 1990s.

The substantial easing in U.S. financial conditions since mid-October has been crucial to this performance. And if the reaction to Powell's speech is any guide - surging stocks and bonds, and a near 2% fall in the dollar - it will remain so.

Local financial conditions are also supportive. Mostly.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

According to Goldman Sachs (NYSE:GS)'s financial conditions indexes, China's conditions are the loosest in almost two years, and have eased over 200 bps in just five weeks; India's and Indonesia's have eased more than 100 bps since early October; and the Philippines' have loosened by almost 100 bps.

Financial conditions in Japan, South Korea and Thailand have all stayed relatively tight, almost entirely due to the appreciation of their currencies against the dollar.

But signs that regional inflation is easing, however, could change that soon enough.

Three key developments that could provide more direction to markets on Friday:

- South Korea inflation (November)

- U.S. non-farm payrolls (November)

- PBOC's Yi speaks

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.