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Asian markets should see a stronger day on Tuesday after US and European markets rally
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Macro outlook
- Global markets: Once again, the UK seems to be driving financial markets – this time in a positive way as the Truss government abandoned its top rate tax cut pledge under pressure from, well, about everyone. US stocks started the quarter with a decent rally. That amounted to 2.59% for the S&P500 and 2.27% for the NASDAQ. Stocks were up across Europe and equity futures are looking pretty positive today, which should also be better news for Asian FX. EURUSD made further gains, rising to 0.9835, while Cable climbed back above 1.13 and the AUD has rallied back above 65 cents ahead of today’s predicted 50bp of Reserve Bank of Australia (RBA) tightening (1130 SGT/HKT). This sentiment improvement has also helped the JPY, which has pulled back once more from the 145 level. Yesterday saw a slight reversal of Friday’s gains in some Asian currencies, with the THB, INR, PHP and IDR losing ground. They will most likely make at least some of that back today. There were very large falls in bond yields across the developed markets yesterday including UK Gilts, where the yield on 2Y notes fell 23.1bp and fell 13.8bp for 10Y bonds. There were some even bigger falls for European bond yields, Italy in particular, which saw the 10Y yield drop by 27.2bp. US treasuries weren’t absent from this move. 2Y US Treasury yields fell 16.5bp while 10Y yields dropped 19bp to leave them at 3.639%.
- G-7 Macro: A softer than expected September Manufacturing ISM index was yesterday’s main macro snippet, though the prices paid index continued to ease slightly lower, and the employment index dropped below 50, as did new orders – finally some more concrete sign - other than the housing market - that the US slowdown is taking hold? There isn’t much to get excited about on today’s G-7 Calendar.
- Australia: Despite the RBA trying to manoeuvre itself towards being able to deliver smaller rate hikes, this meeting is widely anticipated to deliver a further 50bp of tightening, taking the cash rate target to 2.85%. This follows stronger than expected labour market and retail sales data, neither of which suggested any slowdown in the economy. We are also looking for a 50bp hike today but would anticipate the RBA being able to downshift to 25bp moves over the rest of the year.
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What to look out for: RBA decision
- Japan Tokyo CPI inflation (4 October)
- Australia RBA meeting (4 October)
- US factory orders and durable goods orders (4 October)
- Fed officials Williams, Logan Mester and Daly speaking events (4 October)
- South Korea CPI inflation (5 October)
- Japan Jibun PMI services (5 October)
- Singapore PMI manufacturing (5 October)
- New Zealand RBNZ meeting (5 October)
- Philippines CPI inflation (5 October)
- Thailand CPI inflation (5 October)
- Singapore retail sales (5 October)
- US ADP employment, trade balance and ISM services (5 October)
- Fed’s Bostic speaking event (5 October)
- Australia trade balance (6 October)
- Philippines unemployment rate (6 October)
- Taiwan CPI inflation (6 October)
- US initial jobless claims (6 October)
- Fed’s Evans, Cook, Mester speaking events (6 October)
- South Korea BoP current account (7 October)
- Regional GIR data (7 October)
- US non-farm payrolls (7 October)
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Emerging Markets Asia Pacific Asia Markets Asia Economics
Disclaimer
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
