The mood across Asian markets is likely to be one of caution on Wednesday for two main reasons. Investors are concerned about the health of the U.S. economy, which could have far-reaching implications for global markets. Additionally, Nvidia’s earnings report later in the day is expected to impact market sentiment. While U.S. and world stocks saw slight gains on Tuesday, the dollar continued to weaken, and Treasury yields remained relatively unchanged. These factors offer little guidance for investors in Asia, leading to a sense of uncertainty in the region.
With a lack of clear global catalysts, regional events are expected to take on added weight in Asian markets on Wednesday. Bank of Japan Deputy Governor Ryozo Himino is scheduled to speak, following BOJ Governor Kazuo Ueda’s recent ‘hawkish hike’ in July. Ueda’s tone last week suggested that current rates are still below ‘neutral’, indicating a potential for further tightening beyond what markets are currently pricing in. This could have significant implications for investors in Japan and beyond.
Australian Inflation Data
One of the key economic indicators across the Asia/Pacific region on Wednesday will be Australian inflation data. Economists polled by Reuters anticipate a slowdown in annual weighted consumer price inflation to 3.4% in July from 3.8% in June. This would bring inflation closer to the Reserve Bank of Australia’s target range of 2%-3% for the first time since 2021. The RBA has maintained its cash rate at 4.35% since November, with no rate cuts in nearly five years. The Aussie swaps market indicates that no rate cuts are fully priced in until December, with expectations of 100 bps of easing by the end of next year.
In Thailand, deputy finance minister Julapun Amornvivat and central bank governor Sethaput Suthiwartnarueput are both scheduled to speak at a business seminar on Wednesday. There has been ongoing tension between the government and the central bank regarding the path for interest rates. The Bank of Thailand recently left rates unchanged at 2.50% for the fifth consecutive meeting. However, newly-appointed Prime Minister Paetongtarn Shinawatra has criticized central bank independence as an “obstacle” to economic growth, while her predecessor advocated for rate cuts. Despite the Thai baht being a low-yielding currency, it has strengthened in recent weeks, possibly due to the central bank’s reluctance to cut rates.
One significant global driver for investors in Asia on Wednesday is the persistent weakness of the U.S. dollar. The currency hit a fresh low for the year against a basket of major currencies, influencing market dynamics across the region. The dollar’s performance may have implications for trade, investment, and currency valuations in Asia and beyond. Investors will be closely monitoring developments in the currency markets to assess the potential impact on their portfolios.
Asian markets are likely to tread cautiously on Wednesday, with a focus on regional events such as central bank speeches and economic data releases. The ongoing concerns about the U.S. economy and Nvidia’s earnings report add to the sense of uncertainty in the markets. Investors will be closely watching developments in Australia, Japan, Thailand, and the broader region to gauge the impact on their investment strategies. The weakness of the U.S. dollar is another significant factor shaping market sentiment and could drive future market movements in Asia.