Time Out Beckons as China’s Stimulus Boost Fades – Reuters

By Jamie McGeever

A Preview of Asian Markets

Asian markets may experience a slowdown on Thursday following a lackluster session on Wall Street the previous day. The effects of China’s recent, substantial economic stimulus package are also starting to diminish.

Rising U.S. bond yields and the dollar’s strongest increase in a month could temper investor enthusiasm. This combination is putting pressure on the Japanese yen, which opens Thursday trading at a three-week low near 145.00 per dollar.

The broader global economic and policy landscape remains unclear, potentially causing hesitation among investors. Recent disappointing consumer confidence figures in the U.S. have reignited concerns about a "soft landing" for the economy, while growth and inflation perspectives in the euro zone seem to be deteriorating.

On Wednesday, economists at HSBC adjusted their forecasts for the European Central Bank, now anticipating 25 basis point rate cuts at each meeting from October through April 2025, bringing the benchmark deposit rate down to 2.25%.

Weakness in the euro area is a worrying signal for China, especially given the significant trade and financial ties between the two regions. While Chinese stocks surged by 1.5% to reach a two-month high on Wednesday, they finished the day near their lows.

In Hong Kong, stocks have been performing well, with the market up 15% in the past two weeks and reaching its highest level since February 2022. Is a pause on the horizon for this upward trend?

The euro’s decline and the rise in U.S. bond yields contributed to a recovery in the dollar, which rose by 0.4% on Wednesday, marking its largest daily gain in a month after dipping to a new 14-month low.

However, the dollar faced challenges against emerging market currencies, with notable strength from the yuan. It continued its rally, marking six consecutive days of appreciation against the dollar, the longest winning streak since January of last year. The yuan also crossed the 7.00 mark against the dollar for the first time in the same time frame.

Since the spike of global market volatility on August 5, China’s yuan has appreciated over 3% against the U.S. dollar, a noteworthy feat given Beijing’s tight management of the exchange rate.

On Thursday, several key Asian economic indicators will be released, including manufacturing data from Thailand, industrial production figures from Singapore, and international trade statistics from Hong Kong.

From a policy perspective, the Bank of Japan will release minutes from its July 30-31 meeting, while the Reserve Bank of Australia will publish its Financial Stability Review.

Key Developments to Watch:

• BOJ minutes from the July policy meeting
• Singapore industrial production data (August)
• Hong Kong trade figures (August)