Inaugural warning eases risk recovery Via Reuters

Written by Jamie McGeever

(Reuters) – Looking ahead to the day ahead in Asian markets.

Signs of restored health in China’s economy and a strong rally on Wall Street on Friday boded well for Asian markets on Monday, although concerns over President-elect Donald Trump’s move could dampen optimism.

US markets will be closed for Martin Luther King Jr. Day, so global debt will be lighter than usual, and the US debt ceiling is back in full swing. Another reason, perhaps, for Asian investors to tread lightly.

Investors have broadly welcomed the “market-friendly” aspects of Trump’s expected agenda, such as tax cuts and deregulation. But other factors, such as tariffs and mass layoffs, could stoke inflation and slow the Fed’s pace of rate cuts.

In addition, higher long-term interest rates could hurt growth and fuel concerns of ‘stagflation’, making the Fed’s job more difficult. His inauguration speech may include a commitment to marketing strategy, directives and executive orders.

In this context, the saga surrounding TikTok is being watched closely for clues about Trump’s policy-making and approach to China. His latest position is that he will restore access to the Chinese social media app in the United States through an executive order after he is sworn in, but he wants at least half of it to be US investors.

Returning to the markets, the dollar and Treasury yields fell from Monday’s historic lows and ended last week lower, providing a welcome relief to financial conditions for Asian and emerging markets. .

The 10-year yield hit a 16-month high of 4.80% but fell 17 points on the week and hit a 27-month high to register its second weekly loss in 16 weeks.

It seems that the cause was weak US inflation data and the surprising words of Fed Governor Christopher Waller, who dropped the idea of ​​cutting the rate three or four quarters this year.

The rose 3% last week – its best week in 10 – Nasdaq rose 2.4% and rose 1.7%. Asian stocks did not perform well however – the index rose by 0.8%, Chinese stocks rose by only 0.3%, while 225 fell.

China’s “data glut” last week was more encouraging than analysts expected. Overall growth in the fourth quarter was 5.4%, meaning Beijing met its annual GDP growth target of around 5%.

The People’s Bank of China sets interest rates on Monday. A gradual and careful easing of the policy is expected in the first quarter of this year, but not necessarily starting on Monday.

However, Japanese investors are bracing for a rate hike from the Bank of Japan on Friday. Recent comments from BOJ officials point strongly in that direction, and markets have responded accordingly – the yen has strengthened, and Japanese stocks have fallen.

Here are some key factors that could guide the markets on Monday:

– China’s interest rate decision

– Japanese machine instructions (November)

– Business Malaysia (December)