Investors are entering the new week with optimism following positive U.S. job figures. The “soft landing” scenario remains intact, leading to a decrease in the dollar and bond yields. This has fueled a continued “risk-on” sentiment in the stock markets worldwide, with many major equity markets reaching record or multi-year highs. Despite some concerns such as profit-taking, quarter-end adjustments, and worries over valuations, the prevailing attitude of “buy the dip” has kept any market pullbacks shallow and short-lived.
Early Asian trading on Monday may be influenced by European politics, particularly in France where a leftist alliance unexpectedly took top spot in Sunday’s election, potentially causing a hung parliament. This outcome was set to prevent the far-right, eurosceptic National Rally party from forming the government. Nevertheless, Asia is poised to open in a strong position, with Japan’s Nikkei 225 index recently hitting a new record high and the MSCI Emerging Market and MSCI Asia ex-Japan indices also performing well.
In terms of economic indicators, Monday’s Asia and Pacific calendar is relatively light. Attention will be on bank lending, trade and current account data, and overtime pay figures from Japan. While overtime pay is not typically a major indicator, it is worth monitoring this month. Recent labor union surveys showing a significant increase in pay offers highlight the ongoing issue of rising prices impacting consumer purchasing power. This poses a challenge for the Bank of Japan, which aims to raise interest rates while also supporting economic growth.
Looking ahead, the focus in Asia this week will likely be on central bank policy meetings in New Zealand, South Korea, and Malaysia, as well as producer and consumer price inflation figures from China. Globally, market-moving events include U.S. CPI inflation data on Thursday and Federal Reserve Chair Jerome Powell’s congressional testimony scheduled for Tuesday and Wednesday. These events have the potential to impact market sentiment and direction in the coming days.
The outlook for Asian markets appears positive in the near term, with a generally optimistic sentiment prevailing among investors. However, uncertainties related to global economic trends, geopolitical developments, and central bank policies remain key factors to watch. As always, staying informed and monitoring key indicators will be crucial for navigating the dynamic landscape of the financial markets.