By Jamie McKeever
(Reuters) – A look at the day ahead in Asian markets.
The final quarter of the year is underway, and the sense of caution at Tuesday’s open couldn’t be further removed from the excitement and optimism that marked the end of the third quarter 24 hours earlier.
Investors fled riskier assets such as U.S. Treasuries, gold and stocks for the safety of the dollar after Iran fired ballistic missiles at Israel on Tuesday in retaliation for Israel’s campaign against Tehran’s Hezbollah allies in Lebanon.
The S&P 500 and global stocks had their worst day in a month, with the 10-year U.S. bond yield posting its steepest drop in a month and oil up 3% after rising 5% at one point.
As tensions between Israel and Iran escalated, the gloomy sentiment in markets on Tuesday was compounded by a steep decline in a closely watched tracking model estimate of US gross domestic product growth.
The Atlanta Fed’s GDPNow model estimate on Tuesday cut its estimate for third-quarter US GDP growth to 2.5% from 3.1% last week. The one-sixth of a percent decline was the biggest decline since Q3 tracking estimates were launched in late July.
This will set the tone for markets across Asia on Wednesday. Chinese markets are closed for Golden Week, and key economic releases are inflation and manufacturing purchasing managers’ index data from South Korea and consumer confidence from Japan.
Although oil rose sharply on Tuesday, the year-on-year drop in oil prices was a key factor in the cooling of inflation around the world, much faster than many economists and policymakers expected.
In many cases, as in the euro zone, inflation is already at or below the 2% target targeted by many central banks. Figures from Seoul showed on Wednesday that annual consumer inflation in South Korea is expected to have eased to 1.9% in September from 2.0% in August.
This would be the lowest level since March 2021 and the first time below that 2% threshold.
Japan’s markets should be a bit quieter on Wednesday, with Nikkei futures pointing to a more than 1% drop at the open as the dust begins to settle on major political upheaval in recent days.
Investors are getting used to what to expect from new Prime Minister Shigeru Ishiba, who, once considered a monetary policy hawk, now appears to have softened his stance.
He said on Tuesday that the Bank of Japan would maintain loose monetary policy “as a trend” and that his administration would implement former Prime Minister Fumio Kishida’s economic policy and “ensure that Japan fully emerges from deflation”.
Here are the key developments that could provide more direction for Asian markets on Wednesday:
– South Korea Inflation (September)
– South Korea Manufacturing PMI (September)
– Japan Consumer Confidence (September)
(Reporting by Jamie McGeever)
2024-10-02 03:17:28