Futures markets are pointing to a positive start to the Asia Pacific trading week, although a stronger Yen makes Japan an exception. A highly anticipated rate hike from the US Federal Reserve is a central event but a full data calendar has potential to change market thinking. Forward looking PMIs from major economies later in the week could be the most influential reports.
Bond markets steadied on Friday night. Yields remain above annual averages, but comfortably below recent highs. Precious metals are under pressure, but the varying performances in oil and industrial metals markets indicate responsiveness to specific industry conditions rather than macro-economic drivers. In this environment stock specific factors could dominate share market action at the beginning of the week.
US interest rate markets are pricing a 82% probability of a quarter point lift and an 18% chance of a half point increase in US cash rates announced after the Fed meeting on Thursday morning Asia Pacific time. If Fed Chair Powell follows recent ECB scripts markets will see a hawkish interest rate rise balanced by dovish comments. A confirming, soothing path higher is possibly the Fed’s preferred option.
A new Governor of the People’s Bank of China will be announced today, according to overnight reports. Yi Gang is a long standing deputy governor with strong international ties, important ant a time when other major central banks are shifting policy. Analysts may welcome the appointment but little market impact is anticipated.
Forward looking PMIs for Europe’s largest economies Germany and France on Thursday night will draw investor attention, as will US reads on Friday night. Higher levels of investor optimism elevates the importance of ongoing economic expansion, and disappointment could bring sharp reactions.