Get ready for a bullish start to the week

By Jamie McGeever

(Reuters) – A preview of the day ahead in Asian markets from Jamie McGeever.

Asian markets are poised for a strong start on Monday, extending last week’s upside momentum and growing risk appetite on growing hopes that the US economy is heading for a “soft landing” after the approval by Congress last week of a debt ceiling agreement that averts US default.

On Friday, regional and global markets posted strong gains and volatility metrics slumped after the release of US jobs numbers. It seems that the maxim “sell in May and walk away” will not apply this year – investors are optimistic and they are buying.

Some of the moves in major regional stock markets over the past week are worth noting: the MSCI Asia ex-Japan index rose more than 2% on Friday, its best day in five months; Japan’s Nikkei 225 – at a 33-year high – rose last week for an eighth consecutive week, its best run in five years; the Hang Seng Technology Index ended its longest weekly losing streak on record and rose 3.6%.

The Asia-Pacific economic data calendar on Monday will be dominated by a series of Purchasing Managers’ Index (PMI) reports, including for China, Japan, India and Australia, with Indonesian inflation for good measure.

Asian PMIs were mixed. India’s manufacturing grows at its fastest pace in two-and-a-half years, South Korea experiences its longest stretch of restrictive readings in 14 years.

Market sentiment in Asia on Monday could also be boosted by signs of a potential thaw in US-China-US relations, as a senior US State Department official arrived in Beijing on Sunday with meetings scheduled for the coming week.

On the flip side, oil prices could skyrocket on news that OPEC+ is looking to cut production to counter lower prices and an impending supply glut.

Looking ahead, investors in Asia have many economic events and monetary policy decisions to consider this week.

Inflation data from Indonesia, the Philippines, Thailand, Taiwan and China will be released, starting with Indonesia on Monday. Economists polled by Reuters expect annual CPI inflation to ease in May to a one-year low of 4.22% from 4.33% in April.

Revised Japanese GDP is released on Thursday, while China’s monthly ‘data dump’ this week includes consumer and producer price inflation, trade, foreign exchange reserves and total social financing (TSF), a large measure of credit and liquidity in the economy.

These reports will provide a clearer picture of how the world’s second-largest economy is emerging from its pandemic lockdown. So far, it has far exceeded expectations, which is why Chinese assets have come under such pressure.

On Tuesday, the Reserve Bank of Australia is expected to keep its benchmark rate at 3.85%, and on Thursday, the Reserve Bank of India is also expected to keep its repo rate unchanged at 6.50%, according to Reuters polls.

Here are three key developments that could give markets more direction on Monday:

– PMI of China, Japan, India, Australia

– CPI inflation in Indonesia (May)

– Retail sales in Singapore (April)

(By Jamie McGeever; Editing by Diane Craft)

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