By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
A dramatic escalation in political tensions and violence in the United States following Saturday’s assassination attempt on former President Donald Trump looms over global markets on Monday, with Asian assets the first to show what impact – if any – it will have on trading and investing.
If the shooting boosts Trump’s election hopes, analysts believe so-called “Trump victory trades” could include a stronger dollar and a steeper U.S. Treasury yield curve. Gold rose 4% to $60,000 early in the global session on Monday.
Even before Saturday’s violence, there was no shortage of important issues for investors in Asia to discuss on Monday – from expectations of a U.S. interest rate cut to suspected Japanese intervention in the foreign exchange market and a deluge of economic data from China including second-quarter GDP.
Last week’s surprise drop in U.S. inflation could keep the “risk on” flame alive if U.S. bond yields, underlying rates and the dollar fall. Interest rate traders expect the Federal Reserve to cut rates by 75 basis points this year, starting in September.
But if this growth is driven by weak growth and a weak labor market, this optimism will be tempered by caution, especially as the second-quarter earnings season gets underway in the United States.
The Asian calendar on Monday is dominated by “June data” from China, as Beijing publishes figures on housing prices, industrial production, urban investment, retail sales, unemployment for last month, and second-quarter GDP.
Analysts and investors have lowered their expectations.
Asia’s largest economy is expected to grow 1.1% from January to March, leading to an annual growth rate of 5.1%. Both are lower than previous readings of 1.6% and 5.3%, respectively.
China continues to struggle with a protracted property crisis that has dampened investment, weakened consumer confidence and demand, and kept the specter of deflation looming. Last week’s trade, bank lending and key monetary indicators added to the gloom.
On the other hand, China’s central bank is widely expected to leave its one-year medium-term lending rate unchanged at 2.50% on Monday.
Japanese markets are closed for a holiday on Monday but the yen will be trading across the continent, entering the session near a four-week high against the U.S. dollar after rising on Friday.
Japanese authorities have remained tight-lipped about whether they intervened last week. But analysts say the sharp rise in the yen and the Bank of Japan’s daily forecasts for the money market balance strongly suggest official action.
The yen had settled at a 38-year low of around 162.00 yen to the dollar last week, but will continue to fall on Monday at around 157.90 yen to the dollar.
Is there more momentum in the short-covering wave? Perhaps because hedge funds are holding their largest net short positions in the yen in 17 years, according to U.S. futures market data.
The yen’s strength sent Japanese stocks tumbling 2.4% on Friday, their biggest drop since April. After hitting a record high above 42,000 on Thursday, the yen may have more room to fall.
Elsewhere in Asia, India’s wholesale inflation rate is expected to rise sharply to an annual rate of 3.5% in June from 2.6% in May.
Here are the key developments that could provide further guidance to the markets on Monday:
– “Data dump” in China (June)
– China’s GDP (Q2)
– Wholesale price inflation in India (June)