Written by Jamie MacGyver
(Reuters) – A look at the day ahead in Asian markets.
Trading volume and activity across Asia on Monday will be among the lightest this year due to public holidays in the US and UK, but markets are open and there is no shortage of releases for investors to chew on.
The economic calendar sees the release of Chinese industrial profit numbers for April and trade data from Hong Kong, while South Korea hosts a trilateral meeting in Seoul with China and Japan.
With the world's two largest forex trading centers, London and New York, closed, yen traders may be on alert for intervention. The last two recent suspected bouts of yen buying in Japan came during extremely illiquid hours during the global day, one of which was on May 1 when many countries' markets were closed.
The dollar rose again to 157.00 yen, and the latest Commodity Futures Trading Commission figures show that after three weeks of reducing yen short positions, speculators are now starting to load up again.
Could Tokyo be tempted to surprise the market again?
While trading volume will be weak in Asia on Monday, the global investment backdrop remains positive. Despite rising bond yields and central banks becoming increasingly hawkish, markets remain buoyant.
This is largely due to US developments – strong earnings, strong growth and very weak volatility. In fact, the main driver of upward momentum globally is lower volatility.
Of course, the Chinese investment picture is becoming less rosy, and it is perhaps no coincidence that tensions between China and Taiwan are on the rise.
Downward pressures on the yuan's exchange rate appear to be increasing again. The spot yuan rate saw its biggest weekly decline against the dollar since mid-March, and the central bank's daily dollar-yuan fixing rate on Friday was above 7.1100 for the first time since January.
Foreign direct investment in China in the January-April period fell by approximately 28% compared to the same period last year, and Goldman Sachs analysts estimate that foreign currency outflows in April accelerated to $86 billion from outflows of $39 billion in March. .
Although many benchmark stock indices around the world have risen to new highs recently, and the Hong Kong index has rebounded by as much as 20%, Chinese stocks have found it much more difficult.
China's economic surprises index has continued to decline in recent weeks as well, falling on Friday to its lowest level since February 8.
All this comes despite Beijing taking new steps to address the real estate sector crisis. Next week will be quiet in terms of Chinese economic indicators, but April industrial earnings on Monday will be big for investors.
Earnings fell in March, complementing a series of economic indicators for the month such as retail sales and industrial production that pointed to weak domestic demand.
Here are the key developments that could provide further guidance to markets on Monday:
– Trilateral meeting between South Korea, Japan and China
– China industrial profits (April)
– Trade in Hong Kong (April)