Asian Markets Set to Open Higher as Risk Sentiment Rebounds
Curious Day Across World Markets
Asian markets are expected to open on a positive note today, following a peculiar day in global markets. Despite the geopolitical tensions and uncertainty surrounding the violence in Israel and Gaza, almost every asset class experienced gains. Gold, considered a safe-haven asset, saw a significant increase of 1.6%, its best day in five months. Oil also posted its largest rise in six months, while the dollar gave up its early gains. Wall Street managed to recover from 1% losses and closed comfortably in the green.
Fed Officials’ Comments Boost Risk Sentiment
The rebound in risk sentiment can be attributed to comments made by two Federal Reserve officials. They suggested that the recent surge in long-term bond yields and tightening of financial conditions might signal the end of rate hikes by the Fed. Dallas Fed President Lori Logan stated that “there may be less need to raise the fed funds rate,” while Fed Vice Chair Philip Jefferson emphasized the importance of proceeding cautiously with any further increases in the policy rate.
Impact on Asian and Emerging Markets
This shift in sentiment resulted in lower U.S. yields, implied rates, and a weaker dollar. These conditions create a more favorable environment for Asian and emerging markets compared to the initial reaction to the events in Israel and Gaza. In fact, the Asian index managed to achieve a modest gain, marking its best run in over a month.
Light Economic Calendar in Asia
Today’s economic data and events calendar in the Asia-Pacific region is relatively light. Some key highlights include the release of the latest Japanese current account figures, Australian business confidence indexes, and Philippines trade balance data.
IMF and World Bank Meetings
The annual meetings of the International Monetary Fund (IMF) and the World Bank in Morocco will begin today. The event will see the participation of prominent global policymakers such as U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde.
Speeches by U.S. Fed Officials
Four U.S. Federal Reserve officials are scheduled to deliver speeches today. Markets will closely monitor their remarks to determine if they align with the comments made by their colleagues on Monday. Any divergence in a more hawkish tone could potentially dampen the market enthusiasm sparked by Logan and Jefferson.
China’s Property Sector Under Scrutiny
The spotlight is once again on China’s beleaguered property sector. Country Garden, the country’s largest private lender, may announce a restructuring plan for its offshore debt soon. This development comes amid another looming debt deadline for the company.
Key Developments for Market Direction
- IMF and World Bank meetings in Marrakech, Morocco
- Japan current account (August)
- Fed’s Bostic, Kashkari, Waller, and Daly speak