Aug. 23 (Reuters) – Future outlook for Asian markets.
Japanese inflation and monetary policy are in focus in Asian markets on Friday. Nervous anticipation is spreading in global markets ahead of Federal Reserve Chairman Jerome Powell's speech at Jackson Hole. U.S. stocks and bonds fell on Thursday, while the dollar rose. That was a reversal from this week, when the S&P 500 rallied toward its recent all-time high, the 10-year Treasury yield closed at its lowest in more than a year and the dollar hit a 2024 low.
The S&P 500 came within 0.5% of last month's all-time high on Thursday but closed down 0.9% and the Nasdaq lost 1.7%, both its biggest drops since the Aug. 5 volatility shock.
Meanwhile, the MSCI Emerging Market Currency Index fell 0.3% on Thursday, not a particularly large move on the surface, but notable for its biggest drop in four months. Emerging market assets will come under pressure on Friday as the dollar, yields and fears of a U.S. recession all rise.
This is the backdrop for a trading day in Asia where attention will be focused on Japan's inflation rate and testimony from Bank of Japan Governor Kazuo Ueda to lawmakers on monetary policy.
“The BOJ has been working closely with the central bank to raise interest rates by 25 basis points, which is a step toward a recovery,” said Ueda, who is also the governor of the central bank.
The Nikkei stock average has recouped all those losses and then some, closing at a three-week high on Thursday, which is even more impressive considering the yen has held on to nearly all of its gains, up more than 10% in the past six weeks.
Official figures show annual core inflation is expected to rise to 2.7% in July from 2.6% in June, which would mark the 28th consecutive month that inflation has exceeded the BOJ's 2% target and underscore the view of BOJ officials that it is time to continue moving away from decades of ultra-loose monetary policy.
Japan's economy expanded at a much stronger-than-expected 3.1 percent annual rate in the second quarter, and a Reuters poll released this week said 57 percent of economists expect the Bank of Japan to raise interest rates again by the end of the year.
Friday's Asian calendar includes Japan inflation, as well as Singapore inflation and New Zealand retail sales data. Current market expectations are for the Reserve Bank of New Zealand to be the most dovish of the G10 central banks, cutting interest rates by 230 basis points by the end of next year.
Reuters Graphics
Key trends that could provide further direction for Asian markets on Friday include:
– Inflation in Japan (July)
– Bank of Japan Governor Ueda speaks
– Singapore inflation rate (July)
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Reporting by reporter Jamie McGeever.
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