By Jamie McGeever
(Reuters) – A look ahead on Asian markets.
Asian markets are poised for a positive start to the new quarter after further evidence of a US “soft landing” on Friday and data on Sunday that showed China’s manufacturing and services sector activity last month increased accelerated at the same rate.
Monday’s trading volume will be lighter than usual with much of Europe still closed for the Easter holiday, but U.S. stock and bond markets are open again.
Asia’s economic calendar is full of key indicators: manufacturing purchasing managers index reports from several countries, including Japan; South Korea Trade; Indonesian inflation; and quarterly surveys of business conditions in Japan.
The exchange rates of Asia’s two largest economies will once again be in the spotlight: the Japanese yen remains in “intervention” territory, is also under pressure against the dollar but is at a 30-year high against the yen.
The yuan slipped in spot trading last week to its weakest level this year around 7.22 per dollar, but the People’s Bank of China has kept the daily pegging rate virtually unchanged around 7.0950 for the past four days.
This suggests that the PBOC does not want any sudden volatility or weakness. But Beijing’s plight is exacerbated by the yuan’s exchange rate with the yen: it is at its highest level in 30 years against the Japanese currency, giving Tokyo a competitive advantage on the world trading stage.
But Beijing will have welcomed the latest earnings from tech giant Huawei and official PMI data which showed manufacturing activity expanding for the first time in six months.
The manufacturing PMI rose to 50.8 from 49.1 in the previous month and export orders also increased. The official services PMI rose to its highest since June and the composite PMI to its highest since April – numbers that could give a boost to Chinese and global markets on Monday.
Unofficial Chinese Caixin manufacturing PMI data will be released on Monday.
Investors will also be looking to see whether surveys of Japan’s business conditions in the first quarter show evidence of economic momentum and a recovery in domestic demand. Big companies’ capex plans could also signal whether Japan’s stock market boom has more upside.
Another determining factor for the market on Monday could be Indonesian consumer inflation. Rising meat and food prices are expected to lift the annual rate from 2.75% to 2.91% in March, the highest level since August, although still within the target of 1.5%-3.5% of Bank Indonesia.
The central bank left its key rate unchanged at 6% for the fourth consecutive meeting in February and is likely to wait for a rate cut from the Fed before easing.
Regional highlights subsequently include further PMIs, South Korea and Philippines inflation, and the latest monetary policy decisions and guidance from the Reserve Bank of India.
Here are the key developments that could provide more guidance to markets on Monday:
– China Caixin Manufacturing PMI (March)
– Japan Tankan Survey (Q1)
– Indonesian inflation (March)
(By Jamie McGeever; Editing by Lisa Shumaker)