By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie McGeever.
Trading in the Asian market will be lighter than usual on Monday, with no major regional economic data expected and US markets closed, leaving investors to prepare for the first major event of the week on Tuesday – the interest rate decision. from China.
The People’s Bank of China is expected to cut its one- and five-year prime lending rates (LPR) by 10 basis points, to 3.55% and 4.20%, respectively, its latest attempt to prop up China’s creaky economy. China and keep it away from deflation.
Earlier this month, the PBOC cut its medium-term political lending rate for the first time in 10 months, paving the way for LPR benchmark rate cuts and bucking the global trend. raise rates to bring inflation back to policymakers’ targets.
It’s no surprise that the yuan is under heavy selling pressure – down 4% in the past two months and sitting at seven-month lows. Looser monetary policy will do little to reverse this dynamic.
Investors could also keep an eye on Monday for headlines from US Secretary of State Antony Blinken’s visit to Beijing, the first senior US diplomat to visit China in five years amid frosty bilateral relations and dim prospects. of progress on the long list of disputes between the countries of the world. two biggest economies.
Beyond China, investors have two other Asian monetary policy decisions to digest this week: Indonesia’s Bank Indonesia (BI) and the Philippines’ Bangko Sentral ng Pilipinas (BSP) on Thursday.
Both are expected to leave policy unchanged, with BI maintaining its benchmark lending rate at 5.75% and BSP maintaining its key rate at 6.25%.
The broader market tone across Asia on Monday could be one of caution as investors are tempted to take some profits from the recent rally. Japanese stocks jumped 20% in two months and are at a 33-year high, while the MSCI Asia ex-Japan index jumped 3% last week, its best week since January.
Other potential market events in the region later in the week include Japanese consumer price inflation data for May on Friday. The annual core CPI rate is expected to decline to 3.1% from 3.4% in April.
The Bank of Japan left its ultra-accommodative policy unchanged last week and signaled that it was in no rush to change its dovish stance even though inflation has topped the BOJ’s 2% target for more than a decade. ‘a year.
Contrast that with the more hawkish posture of the world’s other major central banks and it’s no surprise the yen is on the defensive – on Friday it hit a 15-year low against the euro.
Here are the key developments that could provide more direction to markets on Monday:
– Bank of Korea Governor Rhee Chang-yong speaks
– US Secretary of State Antony Blinken in China
– Unemployment in Hong Kong (May)
(By Jamie McGeever; Editing by Leslie Adler)