By Jamie McGeever
(Reuters) – A preview of what to expect in Asian markets on Monday.
As the trading week kicks off in Asia, the global market sentiment remains bullish, driven by the strong performance of U.S. stocks. However, local sentiment is more cautious due to concerns about China’s underlying economic issues.
The People’s Bank of China is anticipated to lower its loan prime rates on Monday as part of Beijing’s ongoing efforts to support the struggling property sector, stimulate growth, and combat deflation.
PBOC Governor Pan Gongsheng announced at a financial forum in Beijing that the LPR would be reduced by 20 to 25 basis points on Monday, according to the official Xinhua news agency.
On Friday, the PBOC also unveiled measures to inject over $100 billion into the Chinese stock market, leading to a 3.6% increase in Shanghai’s blue-chip equity index and a 1.6% rise in the MSCI Asia ex-Japan index, marking its best performance since September 26.
While China’s economic data released on Friday were not as dire as feared, with third-quarter GDP growth slightly exceeding expectations at 4.6%, economist Phil Suttle highlighted that the past two quarters have been notably weak, with 2.75% growth on a seasonally-adjusted annualized basis, representing the lowest two-quarter growth rate in modern times outside of COVID-related disruptions.
Stocks reacted positively to the support measures, but bond yields are once again falling. Initially, yields surged on hopes that the measures would stimulate economic growth, but the 10-year yield is now approaching 2.00% once more.
Concerns about U.S.-China trade tensions resurfaced after Republican presidential candidate Donald Trump suggested imposing additional tariffs of “150% to 200%” on China if it were to take action in Taiwan, as reported by the Wall Street Journal on Friday.
Despite global uncertainties, the U.S. economy continues to perform well, with strong economic data, GDP growth exceeding 3%, robust earnings reports, and record highs on Wall Street.
However, some analysts caution that the market may be over-optimistic, as short-term options and technical indicators indicate a potential consolidation phase or a short-term pullback.
Central banks around the world are easing financial conditions through rate cuts, while stocks continue to climb. Investors in Asia will closely monitor the performance of the dollar, which has recently strengthened to a three-month high.
Corrections to Friday’s Morning Bid Asia newsletter: Malaysia’s preliminary GDP data will be released on Monday, October 21, not on Friday.
Key events to watch on Monday include:
– Decision on China’s loan prime rate
– Malaysia’s Q3 GDP release
– Remarks by Reserve Bank of Australia Deputy Governor Andrew Hauser
(Reporting by Jamie McGeever)
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