Asia Morning Bites
Risk-off sentiment to dominate again on Thursday as Western allies expand the list of sanctions
Macro outlook
- Global: Following yesterday’s muted sell-off, pessimism regained the upper hand yesterday and US stocks fell more forcefully. A 2.6% fall in the NASDAQ leaves it at its lows for the year and down almost 16.7% year-to-date. The S&P500 dropped 1.84% leaving it down more than 11% for the year. Equity futures this morning show no sign of any reversal either in US or Asian stock markets. This equity weakness doesn’t seem to be having much of an effect on FX markets though. EURUSD is back to 1.13 having tried and failed to push higher yesterday. And Asian FX was broadly up against the USD on a day that was light for news flow. Gains were led by the PHP, INR and IDR. Despite the equity weakness, US Treasury yields were higher across the curve yesterday, with the back end rising slightly more than the front, for a slight steepening move. 10Y US Treasury yields now sit just below 2.0%.
Besides some revised US GDP data, today will also be light for macro data in the G-7, and the Russia-Ukraine situation is likely to continue to dominate markets.
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China: The authorities have softened the tone on their earlier announced policy to lower delivery fees, and stock prices for food delivery companies in China have recovered some of their previous falls as a result. Similarly, on real estate, the government has highlighted that banks should lend more to real estate developers. This is quite unusual as the government requires the banking system to be insulated from the real estate reforms. These two changes imply that the Chinese government is eager to stabilise the economy before the Two Sessions. Here is our Two Session preview.
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South Korea: The BoK meets today and no action on rates is expected, but it is possible that we see a couple of dissenting votes for a rate hike. The BoK is expected to resume its hiking cycle upon the arrival of the new Governor after Governor Lee Ju-yeol ends his tenure at the end of March. Also, the BoK will release its Economic Outlook Report. We expect this to contain a meaningful upward revision for CPI.
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South Korea: February producer prices rose 8.7% YoY, remaining at an elevated level. Utility prices were up sharply to 13.3%YoY from 9.7% as higher commodity prices kicked in. With high pipeline prices, next week’s CPI is likely to accelerate a bit more.
What to look out for: Geopolitical developments
- Taiwan GDP (24 February)
- South Korea BoK meeting (24 February)
- US initial jobless claims (24 February)
- US GDP, core PCE new home sales (24 February)
- Singapore industrial production (25 February)
- Tokyo CPI inflation (25 February)
- US durable goods and personal spending (25 February)
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
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