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An Asian economic calendar on Friday overflowing with top-tier indicators awaits investors, who look set to close out the week and the month on a downbeat note as worries grow over the strength of the US and global economies.

Investors often cheer ‘bad news’ on the US economy by bidding up risk assets on the view that the Fed will be forced to ease policy. Equally, ‘good news’ often drags stocks and bonds lower because rates may have to stay higher for longer.

Investors’ reaction to revised US GDP figures on Thursday followed neither playbook – bad news was bad news. Slower GDP growth in Q1 pushed stocks, the dollar, and bond yields lower, and relatively dovish comments from New York Fed president John Williams failed to provide much comfort.

The MSCI World, MSCI Asia ex-Japan, MSCI emerging market, and Japan’s Nikkei 225 indexes are all poised for their second weekly loss in a row. Rising bond yields, and now US growth concerns, are taking their toll.

And could the US tech fairy tale be starting to fade too?

Financial conditions certainly seem to be biting. According to Goldman Sachs, emerging markets, Chinese, and global financial conditions are the tightest in a month. Little wonder, perhaps, that investors are taking some chips off the table as the month-end approaches.

It may be month-end on Friday, but there will be no rest for Asian markets. Not if the economic calendar is anything to go by.

China’s official purchasing managers’ index reports for May, a raft of top-tier indicators from Japan including retail sales, industrial production and Tokyo inflation, and first quarter GDP from India and Taiwan are all on tap.

China’s PMIs are expected to show that manufacturing activity in May grew at a similar pace to the previous month when it barely managed to stay expansionary, reinforcing the fragile nature of the recovery in the world’s No.2 economy.

China’s economy blew past expectations to post growth of 5.3% in the first quarter, and a string of April indicators including factory output, trade, and consumer prices suggest it has successfully navigated some near-term downside risks.

But the crisis-hit property sector remains a major drag, deflationary pressures persist, and capital is just as liable to be flowing out of the country than in.

Core inflation in Japan’s capital, meanwhile, is expected to have picked up in May to 1.9% from a two-year low of 1.6% in April, and India’s economy likely grew at a 6.5% rate in the January-March quarter – its slowest pace in a year – due to weak demand.

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

– China official PMIs (May)

– Tokyo inflation (May)

– India GDP (Q1)

(Reporting by Jamie McGeever; Editing by Josie Kao)

A European private wealth manager in Hong Kong told me last week he recently got the catalyst he needed to land a Taiwanese billionaire’s account: geopolitics.

The billionaire was down to two major wealth managers — UBS and JPMorgan Chase — after Credit Suisse’s demise last year. He wanted a third bank but did not want to increase exposure to the Americans.

The Taiwanese tycoon’s worry, the banker said, stemmed from the uncertainty caused by China-US tensions: What if the Americans turned against people like him, or US banks came under pressure to pull back from business there?

In recent years, as the Sino-US saber rattling has increased, I have repeatedly heard from sources in the United States about how companies and investors are de-risking from China, building resiliency in their supply chains, reducing their exposure, and putting a higher risk premium to business there. China is still too big a market to ignore or abandon, they say, but they need a backup, a ‘China plus 1’.

Over the past few days in Hong Kong and Singapore, conversations with more than a dozen senior bankers, officials and investors show the same de-risking is happening on the other end of the world with equal urgency. People are asking what’s their ‘America plus 1.’

Wealthy people like the Taiwanese billionaire are diversifying their assets and exposure away from the United States. Companies are looking for additional funding sources from other parts of the world, such as the Middle East, and building factories in places like Southeast Asia. And they are thinking about how to reduce their dependence on the dollar, these sources said. The sources requested anonymity to speak freely because of the sensitivity of the subject.

These conversations provide a window into how geopolitics is impacting investment decisions in the East. And as these worries lead to actions, they highlight the risks of further fragmentation of the global economy, with attendant consequences, such as inflationary pressures.

It is also clear from these conversations, however, that any such decoupling is unlikely to be complete and will take years, if not decades, given the dollar’s dominant position. One top banker in the region said companies and investors in Asia still want access to the United States as the deepest, most liquid market in the world.

But there appears to be new urgency around these conversations as people see tensions escalate with measures such as tariffs and sanctions. One Singapore-based banker said in the past when people talked about replacing the US dollar, they would talk in terms of 20-30 years; now, they talk about 10-15 years.

US sanctions following Russia’s invasion of Ukraine have brought home the realization that Western authorities can seize assets in a conflict. That has been compounded by worries about the sustainability of US debt levels and the impact on the dollar, the banker said, leading people to ask “why do I have to hold US dollar assets?”

The conundrum can be seen in the data. The US dollar still accounts for nearly 60% of forex reserves, but there has been a gradual diversification away from it, according to the International Monetary Fund.

And while SWIFT data shows the dollar dominating trade finance with an 84% share, the yuan last year became the most widely used currency for cross-border transactions in China for the first time.

In Asia, discussions with sources show more efforts afoot to chip away at that reliance on the US dollar.

The central banks of China, Hong Kong, Thailand, and the United Arab Emirates, for example, are developing a cross-border settlement system that would allow participating banks to settle transactions in local currency.

More central banks are expected to be invited to join as it is further developed.

A search for alternatives to the United States is also happening among some companies. Chinese companies, for example, were looking to places like the Mideast for funding, one China-focused investment banker at a global lender said. He pointed to electric vehicle maker Nio’s USD 2.2 billion deal with an Abu Dhabi investor. “This would have gone to the US in the past,” the banker said.

A top banking executive said companies still wanted to go to the United States, but those such as fast fashion retailer Shein — forced to look for an initial public offering in London after running into hurdles in New York — were being pushed away.

The geopolitics is making everyone think “do I have to have” an alternative, the banker said, adding it had “propelled people to make conscious choices.”

While there is little one can do about it in the near term, the banker said thinking a decade out, people are beginning to ask, “How much do I lean on the dollar?”

(Reporting by Paritosh Bansal; Editing by Anna Driver)

Japanese consumer confidence and Australian inflation are the main points of focus for markets in Asia on Wednesday, as investors ponder the broader implications of a widespread rise in bond yields.

US Treasury yields, the benchmark for global borrowing costs, rose to four-week highs on Tuesday in the wake of a weak US debt auction, leading to a mixed performance on Wall Street.

The Dow fell, the S&P 500 was flat and Nvidia’s extraordinary rally powered the Nasdaq to a fresh record high – shares in the AI poster child have soared 20% in the last three trading days and the firm is now worth USD 2.8 trillion.

But Asian markets on Wednesday may be more sensitive to the tightening of financial conditions from US yields than the US tech boom. Some analysts reckon the 10-year Treasury yield may now be entering a higher range of 4.50% to 4.70%, and the two-year yield is knocking on the door of 5.00% again.

Closer to home, Japanese Government Bond yields are also under renewed scrutiny. Yields are making new multi-year highs across the curve, prompting a flurry of comments from Japanese and global officials in recent days.

The 10-year JGB yield rose for an eighth straight day on Tuesday to hit a fresh 12-year high of 1.035%, and the 2-year JGB yield inched up to a new 15-year peak of 0.36%.

Bank of Japan Governor Kazuo Ueda on Saturday said the bank’s ‘basic stance’ is that long-term bond yields should be set by markets. But this is difficult for the BOJ, which has for years been hoovering up JGBs in its battle against deflation and now owns more than 50% of the entire market.

Higher bond yields raise the BOJ’s interest bill. A lot.

On the other hand, higher JGB yields could support the yen, which officials would probably welcome – Japan’s finance minister on Tuesday said he was more concerned about the downside of a weak exchange rate right now, namely the increased burden on companies and consumers from higher import prices.

Do JGB yields take a breather here? BOJ data on Tuesday sent out mixed signals on inflation – corporate services prices are rising at their fastest pace since 2015, but other data show key measurements of underlying inflation falling below the bank’s 2% target for the first time since August 2022.

If ‘higher for longer’ JGB yields boost the yen, Japan Inc. could feel the squeeze. The weak currency has attracted huge foreign investor flows into Japan, but with further ‘material’ weakness no longer likely, HSBC strategists are closing their overweight position in Japanese equities.

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

– Australia inflation (April)

– Japan consumer confidence (May)

– IMF’s Gita Gopinath briefs media following IMF’s annual assessment of the Chinese economy

(Reporting by Jamie McGeever; Editing by Josie Kao)