Scope for a month-end bounce in Asia

Investors await a torrent of Asian economic data on Tuesday, including Indian GDP, with market sentiment appearing to brighten a little going into the last trading day of the month.

As US bond yields eased and there was a rare pause in the cranking up of Fed rate expectations, equities were relatively calm on Monday – Europe’s Stoxx 600 had its best day in more than three weeks, the S&P 500 and Nasdaq both rose modestly and the VIX ‘fear’ index fell back to a 20 handle.

Asian markets also held up better on Monday than many might have expected following Wall Street’s slump on Friday and the heightened US-China tensions over the weekend. The yuan even scored its biggest rise against the dollar in a month.

If it is end-of-month profit-taking and position-squaring that are going to drive Asian markets on Tuesday, there may be scope for a decent bounce.

The MSCI Asia ex-Japan index is down nearly 7% in February – compare that to the MSCI World index, down almost 3%, and the S&P 500, down around 2%.

The slew of economic indicators across the region due for release on Tuesday is topped by Q4 Indian GDP. Economists reckon growth slowed further amid weakening demand and is set to lose more momentum going into this year as higher interest rates weigh on activity.

The consensus forecast is for annual growth of 4.6%, which is expected to slow to 4.4% in Q1 this year. Growth across 2023/24 is expected at 6.0%, below the government’s 6.5% goal.

Investors get the latest snapshots of industrial production and retail sales from Japan, credit and lending figures from Australia, and trade data from Vietnam.

Vietnam joins Thailand, Hong Kong and South Korea in reporting trade data this week, figures that will give an insight into how Asia has started the year in terms of trade with the rest of the world.

While economists agree that globalization probably peaked more than a decade ago, global trade has held up pretty well since the pandemic and Russia’s invasion of Ukraine. If this resilience persists, the long-term outlook for emerging markets may just be a shade brighter.

(By Jamie McGeever; Editing by Josie Kao)