By Jamie McGeever
(Reuters) – A look at what’s ahead for Asian markets today.
Investors are starting the new week in high spirits after last Friday’s US jobs figures kept up the “soft landing” narrative, pushing the dollar and bond yields lower and adding fuel to the relentless “risk-on” rally in stocks.
Most of the world’s major stock markets are at all-time or multi-year highs, and there doesn’t appear to be much on the immediate horizon that could derail them.
Profit-taking, end-of-quarter position adjustments, concerns about valuations or market concentration, and political or regulatory jitters have all come into play recently. But the overwhelming “buy when stocks fall” mentality has ensured that any pullback has been shallow and brief.
European politics may have some bearing on early Asian trading on Monday: France was on track for a hung parliament in Sunday’s election, with a left-wing alliance unexpectedly taking first place ahead of the far-right in a major upset that was set to prevent the far-right eurosceptic National Rally party from leading the government.
Asia is opening on a positive note. Japan’s Nikkei 225 index hit a new record of 41,100 points on Friday and is up 7% in just two weeks, while the MSCI Emerging Market and MSCI Asia ex-Japan indices are at their highest levels in two years.
More broadly, the MSCI World, S&P 500 and Nasdaq all hit record highs last week, and eurozone stocks hit their highest level in 23 years last month. Britain’s FTSE 100 hit a record high in May.
The Asia-Pacific agenda on Monday is light, with the focus on bank lending, trade and the current account, and Japan’s overtime pay figures. Philippine central bank governor Eli Remolona and finance secretary Ralph Recto will also speak at a business forum on Monday.
Overtime pay in Japan is not typically considered a top-level indicator, but it is worth paying attention to this month.
A recent survey by unions showed that companies have offered to raise wages by 5.1% on average this year, the biggest increase in 33 years and well above inflation, which is now around 2%. But figures on Friday showed household spending slumped in May as higher prices continued to cut into consumers’ purchasing power.
This is a headache for Bank of Japan policymakers, who want to raise interest rates and have placed a premium on rising wages but are concerned about the impact on an economy that is far from firing on all cylinders.
Looking ahead, the most market-sensitive events in Asia this week are likely to be central bank policy meetings in New Zealand, South Korea and Malaysia, and producer and consumer price inflation figures from China.
The main market drivers globally are likely to be US CPI inflation on Thursday and Federal Reserve Chairman Jerome Powell’s two days of congressional testimony scheduled for Tuesday and Wednesday.
Below are key developments that could provide further direction to markets on Monday:
– Wage growth in Japan (May)
– Japan current account (May)
– General elections in France
(Reporting by Jamie McGeever)