Time is running out as stimulus momentum in China fades By Reuters

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

Asian markets may lose momentum on Thursday after a sluggish performance on Wall Street on Wednesday and as the sugar high from China’s biggest economic and market stimulus package since the pandemic earlier in the week shows signs of fading.

Higher US bond yields along the curve and the dollar’s biggest gain in a month should limit investors’ risk appetite. This one-two combination is certainly weighing on the Japanese yen, which enters Thursday’s session in Asia at a three-week low near 145.00 per dollar.

The global growth and policy picture is also quite unclear, which could give investors pause. Weak US consumer confidence figures have revived doubts about a US ‘soft landing’, while the eurozone’s growth and inflation outlook appear to be diminishing by the day.

Economists at HSBC revised their forecasts for the European Central Bank on Wednesday and now expect cuts of 25 basis points at each meeting from October to April 2025. This would take the benchmark deposit rate to 2.25%.

Weakness in the euro zone should raise alarm bells for China, given the strength of bilateral trade and financial ties. While Chinese shares rose another 1.5 percent on Wednesday to a fresh two-month high, they closed near the day’s lows.

Hong Kong shares are on a roll – up 15% in just two weeks – and the index is at its highest since February 2022. Could both be set for a break?

Meanwhile, the euro’s slide and rising U.S. bond yields helped the dollar recover ground on Wednesday. After earlier flirting with a fresh 14-month low, it rose 0.4 percent to post its biggest daily gain in a month.

However, the greenback struggled more against emerging market currencies and perhaps the most eye-catching move was the .

It continued its impressive run over the past two months and rose for a sixth day against the greenback in spot trading, its longest winning streak since last January. Meanwhile, it broke through 7.00 per dollar for the first time also since last January.

Indeed, since the one-day burst of global market volatility on August 5, China’s yuan has appreciated more than 3% against the US dollar, a remarkable run given how tightly Beijing manages the exchange rate.

Asian economic indicators on Thursday included manufacturing data from Thailand, industrial production figures from Singapore and the latest international trade snapshot from Hong Kong.

On the policy front, the Bank of Japan publishes the minutes of its July 30-31 policy meeting and the Reserve Bank of Australia publishes its Financial Stability Review.

Here are the key developments that could provide more direction for Asian markets on Thursday:

– Minutes of the BOJ’s July 30-31 policy meeting

– Singapore industrial production (August)

– trade with Hong Kong (August)