The Asian market seems to be on a positive trajectory as investors start the week with a positive mood. The recent U.S. job figures have reinforced the “soft landing” narrative, resulting in a decrease in the dollar and bond yields. This has fueled the ongoing rally in stocks, with most major equity markets worldwide reaching record or multi-year highs. Despite concerns such as profit-taking, quarter-end position adjustments, and worries over valuations and market concentration, the prevailing sentiment to “buy the dip” has kept any pullbacks shallow and brief.
Recent developments in European politics, particularly the outcome of France’s elections, could influence early trading in Asia. With France potentially facing a hung parliament and unexpected results reshaping the political landscape, the markets may react to these uncertainties on Monday. However, Asia appears to be opening in a strong position, with Japan’s Nikkei 225 index reaching a new record high and regional indices like the MSCI Emerging Market and MSCI Asia ex-Japan also trending upwards.
Monday’s economic calendar in Asia is relatively light, with a focus on key data such as bank lending, trade, current account figures from Japan, and speeches by prominent figures like Philippines central bank governor Eli Remolona and finance secretary Ralph Recto. Japan’s overtime pay data, though not typically a high-impact indicator, will be closely watched this month. The recent increase in wage offers by firms could indicate a positive trend, but the decline in household spending due to rising prices poses a challenge for the Bank of Japan’s monetary policy decisions.
Looking ahead, central bank policy meetings in New Zealand, South Korea, and Malaysia, as well as producer and consumer price inflation figures from China, are expected to be significant drivers of market sentiment in Asia. Globally, market participants will closely monitor U.S. CPI inflation data on Thursday, along with Federal Reserve Chair Jerome Powell’s Congressional testimony scheduled for Tuesday and Wednesday. These events could potentially impact the direction of financial markets in the coming days.
The Asian market outlook appears to be positive, with strong indicators and promising trends. However, it is essential for investors to remain cautious and monitor key economic data and geopolitical developments that could influence market dynamics. The prevailing “risk-on” sentiment may face challenges from uncertainties in European politics and economic data releases, requiring a vigilant approach to navigate potential risks and opportunities in the current market environment.