Sept. 22 (Reuters) – Financial markets columnist Jamie McGeever looks at the future of Asian markets.
With global markets still reeling from the shock waves following the Federal Reserve’s “hawkish pause” on Wednesday, the Bank of Japan on Friday announced the most volatile week in recent memory for central bank policymaking. Finished one.
On Thursday, global stocks and risk assets fell for the second day in a row, and U.S. Treasury yields rose to multi-year highs. This is because investors have adjusted to the Fed’s revised outlook for interest rates, making their stance on interest rates “higher for the longer term” more acute.
The MSCI World Index fell 1.5%, its biggest decline in six weeks and its fifth straight decline, its worst decline since March. MSCI’s Asia ex-Japan index also had its worst day since early August, sending Wall Street to a three-month low.
In a sign of how much things are changing, HSBC’s fixed income research team, led by Stephen Major, one of the strongest proponents of the “low for long” view of interest rates and yields, on Thursday We raised our yield forecast.
But further complicating the situation for investors were surprisingly dovish decisions by the Bank of England and the Swiss National Bank. They left interest rates unchanged on Thursday, confounding expectations that they would raise them.
All eyes are now on the Bank of Japan.
Although none of the 26 economists polled by Reuters expected the accommodative stance to change on Friday, nearly 80% said the central bank would also abolish its 10-year yield cap by the end of 2024. The policy in which more than half of respondents expect negative interest rates will end next year.
The fog of uncertainty and the gravitational pull of domestic and global opposition continue to grip Japan’s assets.
On Thursday, the 10-year Japanese government bond yield hit a 10-year high of 0.75%, and the yen also rebounded, but from a new 2023 low of 148.45 yen to the dollar hit earlier in the day.
Speculation that Tokyo may intervene in the foreign exchange market to support the yen’s value shows no signs of abating. Prime Minister Fumio Kishida said on Thursday that options were not ruled out in dealing with “excessive fluctuations”, adding that “authorities are in close contact internationally”.
Friday’s Bank of Japan meeting is Asia’s biggest event, but there are a number of other indicators that could determine the direction of local markets, including the latest inflation figures from Japan and Malaysia, and trade figures from New Zealand.
The first Purchasing Managers Index report for September begins filtering on Friday, starting with Australia and Japan, followed by Germany, France and the UK later in the day.
Here are the key developments that could give further direction to the market on Friday:
– Bank of Japan Policy Meeting
– Japan Inflation (August)
– Japan and Australia PMI (September)
Written by Jamie McGeever.Editing: Josie Kao
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