Marketmind: Calm before the storm

By Jamie McGeever

(Reuters) – A look at the day in Asian markets by Jamie McGeever.

It looks like a quiet start to the week in Asia on Monday, but don’t be fooled: It could be the calm before the storm.

A range of regional economic indicators, including Japanese unemployment and PMIs from China, Australia and India, as well as US nonfarm payrolls and interest rate decisions from the US, Eurozone and UK are sure to provide fireworks during the week.

With that in mind, investors may choose to trim exposure to excess event risk on Monday, particularly as the end of the month approaches and given the extent to which stocks have rallied since the start of the year.

The MSCI Asia ex-Japan index is at a nine-month high and up more than 30% from its October low. It’s up in 11 of the last 13 weeks and is on track for an 11% monthly increase.

GRAPHIC-Global Markets in 2023 https://fingfx.thomsonillustration.com/gfx/mkt/zjvqjerrgpx/Pasted%20image%201674813566094.png

This is far outpacing the S&P 500, Eurozone and UK stocks, Japan’s Nikkei 225 and the MSCI World index, so there may be a little profit taking.

In India, Gautam Adani faces a critical day on Monday as the second day of bids to sell $2.5 billion shares in his flagship company overshadowed by a $48 billion rout in the Indian billionaire’s stock triggered by a report of a US short seller.

China reopens after the Lunar New Year holiday, so trade volumes in Asia will return to something close to normal. Just in time for a potentially volatile 24-hour period between Wednesday and Thursday when the Federal Reserve, European Central Bank and Bank of England will announce their latest policy decisions.

The debate over a recession or soft landing in the US and the Fed’s “pivot” or “higher for longer” may gain more clarity after Fed Chairman Jerome Powell’s press conference on Wednesday. Right now, investors’ glasses are half full.

GRAPHIC-World stock adds $4 trillion year-to-date

Wall Street’s “fear index” – the VIX Volatility Index – fell below 18.0 on Friday for the first time in over a year, and perhaps a little under the radar, US bond market volatility is now the lowest since last June.

On the Asian data front this week, China’s Purchasing Managers Indices will provide the most up-to-date snapshot of how the region’s largest economy is emerging from zero-COVID restrictions, while data on Japanese unemployment and retail sales are available. Tuesday.

There is a deluge of Japanese earnings reports this week, from corporate titans including SoftBank, Sony, Sumitomo and financial institutions Mizuho, ​​Daiwa and Mitsubishi UFJ.

Three key developments that could provide more direction to markets on Monday:

– New Zealand Trade (December)

– GDP Germany (Q4)

– Eurozone sentiment indicators (January)

(Reporting by Jamie McGeever in Orlando, Florida; Editing by Lisa Shumaker)

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