Indian rates, Japan GDP in the spotlight

June 8 (Reuters) – An interest rate decision from India and revised Japanese GDP will be the big local drivers for Asian markets on Thursday, with wider sentiment soured by a profit-taking slump in US tech stocks and a surprising rate hike in Canada.

After rallying more than 25% this year, and more than 20% from the US banking shock low in March, the Nasdaq had its worst day since April, sliding 1.3%.

The index of Mega Tech stocks that has driven this year’s US equity rally almost single-handedly – up more than 60% this year – slumped almost 3% for its biggest fall since February.

The Bank of Canada’s decision to raise rates to a 22-year high of 4.75% was not widely expected. This followed an equally surprising rate hike from Australia the day before, a one-two hawkish punch from policymakers that investors had probably not braced for.

Throw in a 1% rise in oil prices, a slump in Chinese trade activity, and the yuan hitting a fresh 6-month low, and the backdrop for Asian markets in the second half of the week looks a bit darker than the first half.

The Reserve Bank of India is expected to leave its key interest rate unchanged at 6.50% and for the rest of 2023, according to a Reuters poll of economists. Although inflation hit an 18-month low of 4.70% in April, it is not seen falling to the RBI’s 4% medium-term target for at least another two years.

If inflation is that sticky, investors can perhaps expect a ‘hawkish pause’ rather than a ‘dovish pause’ from the RBI, especially in light of the hawkish surprises from Australia and Canada this week.

Japanese first-quarter growth, meanwhile, is expected to be revised up one-tenth of a percent to 0.5% on a quarterly basis, and three-tenths of a percent to 1.9% on an annualized basis, thanks to solid investment from manufacturers.

The US dollar is back above 140.00 yen and a soft GDP print could push it closer to the year-to-date high just below 141.00 yen. A narrower-than-expected current account surplus in April, figures for which are also out on Thursday, could do the trick too.

The Australian dollar, which hit a one-month high on Wednesday following the RBA’s rate hike, could get a nudge from Australian trade data on Thursday. The consensus forecast is for the surplus to narrow slightly from March to A$14 billion.

Here are three key developments that could provide more direction to markets on Thursday:

– India interest rate decision

– Japan GDP (Q1, revised)

– Australia trade (April)

(By Jamie McGeever)