Soft landing US hopes will lift EM assets By Reuters

By Jamie McGeever

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

The trading week kicks off in Asia on Monday with investors in a fairly good mood following last week’s return to risk appetite as the fabled US ‘soft landing’ comes back into view, a scenario that should bode well for Asian and emerging markets.

Emerging market stocks posted their biggest weekly gain since April and global stocks their best week since October. The Nasdaq and S&P also had their best week since October, and Wall Street’s “fear index” of volatility is back below 15.0.

Even Chinese stocks snapped a three-week losing streak to bounce back from six-month lows. Although the rise was 0.4%, it is a move in the right direction as far as China bulls – and policy makers – are concerned.

But China’s economic numbers remain weak and continue to beat even economists’ increasingly gloomy expectations. China’s economic surprises index, which has been negative since June, fell last week to its lowest level in nearly a year.

US data and expectations have also tumbled in recent months, but there are signs of stabilization and investors are cooling bets that the Fed will be forced to cut interest rates next month.

Traders have cut the likelihood of a 50 basis point move to around 25% as market turmoil from earlier this month has evaporated. If recession fears subside, riskier assets such as equities and emerging markets should benefit.

Recent strong rebounds in US megacaps should also support Asian assets exposed to US Big Tech – shares of Nvidia (NASDAQ: technology could be in line for additional gains in this regard. week.

Monday’s Asian economic and political calendar is light. Japanese car orders, trade with Malaysia and Thai GDP figures are the main highlights.

Figures from the US Commodity Futures Trading Commission on Friday, meanwhile, showed that currency speculators are now “long” the Japanese yen for the first time since March 2021.

Since the first week of July, when the dollar was at a 38-year high of around ¥162.00, CFTC funds have fully covered one of the largest yen short positions on record, and the Japanese currency has rallied by about 10%.

These are seismic moves, but it’s worth remembering what it took to trigger them – another intervention from Tokyo, an interest rate hike and a driving stance by the Bank of Japan, and a frenzy of buying and running on conditions of safety following the global volatility shock earlier this month.

The wave of “risk on” sentiment that hit global markets last week put the brakes on that, however. Dollar/yen rose 0.7%, not a big move by recent standards but the biggest gain since June.

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

– Japan car orders (June)

– trade with Malaysia (July)

– Thailand’s GDP (Q2)