Weekly recovery in coverage, China data deluge looms By Reuters

By Jamie McGeever

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

Asian stocks are poised to end the week on a strong footing on Friday, boosted by another solid rally on Wall Street the day before, which puts some of the continent’s key benchmarks on track for modest weekly gains.

The European Central Bank cut interest rates on Thursday, and the Fed is set to begin a fairly substantial easing cycle next week. While the former was not a surprise and traders had expected the latter for some time, they are favorable to a “risk-on” environment that should boost sentiment in Asia on Friday.

Both firms and the Nasdaq rose for a fourth straight day on Thursday. The S&P 500 is within 1 percent of a record high hit on July 15, and the Nasdaq, up 5.3 percent this week, is on track for its biggest weekly gain this year.

In other good news, it snapped a seven-day losing streak in style on Thursday, jumping 3.4%. Remarkably, it did so without the help of a weaker yen — the yen hit a new high for the year against the dollar, and while it bounced back, it still ended Thursday slightly stronger.

But if the yen’s strength persists, the outlook for Japanese stocks is bleak. Indeed, the outlook for global asset prices may also be unclear if the yen continues to trade as SocGen strategists expect.

That creates “clear market risks as market leverage in this cycle comes mainly from the Japanese currency,” they said on Thursday, adding that they were increasing their exposure to the yen and reducing their exposure to Japanese equities.

If Asian markets end the week at a high, the exception again could be China. Shares in Shanghai posted their lowest close since January 2019 on Thursday.

Shanghai’s blue chip index is likely to end the week in the red, its fourth straight weekly decline and 14th decline in the past 17 weeks. It was a miserable run that saw the index lose 15%, but it surely has to come back at some point. Correct?

A batch of top economic data from China over the weekend could be the trigger, although this may require some rare positive surprises.

Beijing released August home price, investment, industrial production and retail sales figures on Saturday, with economists polled by Reuters generally expecting the figures to be weaker than July’s readings.

Meanwhile, Friday’s Asian calendar sees the release of India’s wholesale price inflation, a speech by Bank of Thailand Governor Sethaput Suthiwartnarueput and Bank of Japan board member Naoki Tamura.

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

– WPI Inflation in India (August)

– Import and export prices from South Korea (August)

– New Zealand Manufacturing PMI (August)