US inflation, China spell caution plans; BOK prepares to reduce By Reuters

By Jamie McGeever

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

Investors in Asia enter the final trading day of the week with sentiment slightly dented by surprisingly sticky US inflation the day before and a sense of caution ahead of much-anticipated news of China’s stimulus plans from Beijing the following day.

Wall Street posted only slight losses on Thursday, with the downside likely cushioned by weekly jobless claims numbers that would suggest the Fed remains on track to cut interest rates by another 50 basis points this year.

Asia will struggle to get much from Treasuries or the dollar – the greenback ended Thursday with yields mixed across the curve in narrow ranges.

Traders have lowered expectations of Fed rate cuts since last week’s stellar US jobs report, but aren’t quite at the point of pricing in a break in the cycle. That’s what Atlanta Fed President Raphael Bostic floated Thursday, though. Could incoming data really lead to an override soon?

The highlight on the Asian calendar on Friday is the Bank of Korea’s interest rate decision. Economists expect the BOK to make its first interest rate cut since the pandemic, kicking off the easing cycle with a 25 basis point cut to 3.25%.

All but three of 37 economists in a Reuters poll expect that from the BOK, and the rest said they expect no change. In general, analysts expect the BOK to move more slowly than its regional peers in the coming months.

Inflation eased sharply to 1.6% in September from 2% in August, the lowest since early 2021 and below the BOK’s 2% target, but household debt and property prices are high.

India’s trade data, Malaysia’s industrial production figures and New Zealand’s manufacturing PMI for September make up the rest of the region’s calendar on Friday.

Manufacturing activity in New Zealand has fallen in every month since March last year, the PMI shows, although the pace of contraction has slowed sharply in the past two months.

The announcement comes days after the country’s central bank cut interest rates by half a percentage point and signaled further easing would follow.

Looking ahead to Saturday, all eyes will be on Beijing, where China’s Finance Ministry will detail fiscal stimulus plans to boost the economy. It is not clear whether this means that new fiscal steps will be taken to revive economic growth or that the recently announced package of measures will be explained in more detail.

The hope, if not the expectation, is being built that it is the former. If it’s the latter, investors are likely to be disappointed, and there’s a good chance that the stunning run in Chinese stocks over the past two weeks will reverse on Monday, perhaps significantly.

Here are the key developments that could provide more direction to the markets on Friday:

– Interest rate decision for South Korea

– trade with India (September)

– New Zealand Manufacturing PMI (September)