Written by Jamie McGeever
(Reuters) – Looking ahead to the day ahead in Asian markets.
The rise in world markets on Monday seems to bring the dollar closer, especially its performance compared to emerging market currencies, after the warning of US President-elect Donald Trump against the so-called ‘BRICS’ countries.
In a social media post on Saturday, Trump demanded that the ‘BRICS’ countries – Brazil, Russia, India, China and South Africa – pledge not to create a new currency or support another currency to replace the US dollar, or face 100%. prices.
This comes after Trump already added more volatility to global financial markets last week by raising tariffs on China, Mexico, and Canada – the countries with which the US has the largest trade deficit.
The path of the dollar on Monday will be interesting to watch. It snapped an eight-week winning streak last week for its steepest weekly fall since mid-August, as the US rate cut expectations and Treasury yields fell.
But the dollar’s biggest decline last week was down to its weakness against the euro and the yen. It has strengthened significantly against other G10 currencies – not least the Canadian dollar – and especially emerging and Asian currencies.
Sentiment on emerging markets as the final month of the year begins is still very low. EM bond outflows remain heavy, and according to analysts at Barclays (LON:) Strong EM bond funds last week registered their second biggest outflows so far this year.
But there are encouraging signs from China that a raft of stimulus measures and support from Beijing may be on the way in recent months.
A private survey on Sunday showed that prices of new homes in China rose at a year-on-year rate of 2.40% in November compared with 2.08% in October. Also on Saturday, data from China’s purchasing managers’ index showed that factory activity expanded slowly for a second straight month in November, and at its fastest pace in seven months.
Is there light at the end of the tunnel for China’s domestic economy? As Trump ratchets up trade threats ahead of his inauguration next month, policymakers in Beijing and Chinese bulls will certainly be optimistic.
The Asian economic calendar on Monday sees the release of a flurry of PMI manufacturing reports, including China’s ‘unofficial’ production Caixin PMI data for November. Will that reinforce the encouraging signs from the ‘official’ figures over the weekend?
Economists polled by Reuters expected a reading of 50.5, up from 50.3 in October, which would mark the fastest pace of expansion since June.
Other regional highlights on Monday included the latest Australian sales data and inflation figures from Indonesia. According to a Reuters poll, consumer prices rose at an annual rate of 1.50% in November, cooling from 1.71% the previous month. That would be the lowest annual inflation rate since June 2021.
Here are the key developments that could provide additional direction to markets on Monday:
– China Caixin manufacturing PMI (November)
– Australian retail sales (November)
– Inflation in Indonesia (November)
