Les marchés asiatiques cherchent un répit dans la frénésie de vente des obligations américaines

Jamie McGeever, a financial markets columnist, provides an update on the Asian markets for the upcoming day.

Investors who were hoping for a respite from the frenzy of selling in US bonds got their wish on Monday, which should bode well for Asian markets on Tuesday, although doubts about the duration of the calm are likely to arise. Tuesday’s regional economic calendar is light, with highlights including South Korea’s producer price inflation for September, flash Japan and Australia purchasing managers’ index (PMI) data for October, and a speech by Reserve Bank of Australia Governor, Michele Bullock. All these factors could trigger short-term movements in their respective currencies, which all gained ground to varying degrees against the battered dollar on Monday.

September’s PMI indices showed that manufacturing activity in Japan and Australia contracted, while services sector activity increased, although growth in Japan was the slowest of the year.

However, the overall picture is still dominated by the ebb and flow of the US Treasury market. The 10-year yield finally breached 5.0% on Monday but quickly fell back, and the 20 basis point drop from peak to trough pushed US stocks into positive territory for most of the day and sent the dollar lower.

Does all this set up for a “risk-on” day in Asia on Tuesday then? Not necessarily.

Wall Street surrendered most of its gains late in the day, with only the Nasdaq of the big three indices closing higher – an intuitive move, perhaps, given the sensitivity of the tech sector to interest rates.

While the broad easing of financial conditions on Monday – lower Treasury yields and a weaker dollar – should support emerging market assets, caution is warranted in view of Wall Street’s late drift lower.

The same goes for the latest signals from China, which continues to experience significant capital outflows.

According to Goldman Sachs, outflows reached $75 billion in September, the highest monthly figure since 2016, versus $42 billion in August.

“The unfavorable interest rate differential between China and the US is likely to result in persistent depreciation and pressures on outflows in the months ahead,” Goldman analysts warned.

China’s major stock indexes hit their lowest levels since February 2019 on Monday, and given China’s weight in Asian and emerging market stock indices, Tuesday could prove challenging.

Both the MSCI Asia ex-Japan and MSCI Global Emerging Market indices have fallen around 13% in the past three months and on Monday hit their lowest level since November 11 last year.

The yen and Japanese bonds will be in focus again on Tuesday after the yen briefly slipped below 150 per dollar and the 10-year yield hit a new decade high on speculation the Bank of Japan could tweak its yield curve control (YCC) policy in the coming months.

Here are the key developments that could shape markets on Tuesday:

– Flash Japan manufacturing PMI (October)

– Flash Australia PMI (October)

– South Korea producer price inflation (September)