Three central bank policy decisions dominate the economic calendar in Asia this week, as investors continue to grapple with the profound market implications of the most dramatic repricing of U.S. interest rate expectations in decades.
This comes against an increasingly nervy geopolitical backdrop - Sino-U.S. relations are deteriorating over the spy balloon crisis, and the one-year anniversary of Russia's invasion of Ukraine falls on Friday.
U.S. markets are closed on Monday for Presidents Day so Asian activity and volumes will be lighter than usual. This could give traders some rare breathing space to reflect on the scorching rise in U.S. market-based rates and yields.
Wall Street and global markets more broadly have held up remarkably well - the S&P 500 and MSCI World index ended the week down just 0.3%, and the Nasdaq rose 0.6%.
Asia has felt the heat more. The MSCI Asia ex-Japan index is down three weeks in a row, its worst run since October. Chinese stocks are down three weeks too, with last week's fall accelerated by Friday's 1.5% slump - the steepest this year - after Lenovo reported its largest revenue fall in 14 years.
The People's Bank of China is scheduled to set its lending benchmark interest rates on Monday morning. Many analysts expect it to keep benchmark lending rates unchanged for a sixth month, leaving the one-year loan prime rate at 3.65% and the five-year rate at 4.30%.
GRAPHIC - Chinese interest rates
The Reserve Bank of New Zealand is expected to scale back its tightening on Wednesday, and raise rates by half a percentage point to 4.75%. It will then repeat the dosage by mid-year for a peak rate of 5.25%, according to a Reuters poll.
The Bank of Korea on Thursday, meanwhile, is expected to keep its policy rate on hold at 3.5%, which would mark its first on-hold decision after back-to-back hikes since April.
But don't be surprised if guidance is more hawkish than last month - inflation is sticky, the U.S. policy outlook has shifted dramatically, and the won has slumped 7% in the last two weeks.
GRAPHIC - New Zealand and South Korea interest rates
Other market-moving Asian economic data this week include Japanese consumer price inflation for January on Friday - expect a rise in the annual rate to a 41-year high above 4% - and final readings of Q4 Hong Kong and Taiwan GDP on Wednesday.
On the corporate front, the controversy surrounding India's Adani Group is becoming increasingly political. Reuters reported on Friday that the Indian government has told the country's top court to examine the "truthfulness" of the allegations made against the group by U.S. short seller Hindenburg Research.
Here are three key developments that could provide more direction to markets on Monday:
- China interest rate decision
- Indonesia current account (Q4)
- Euro zone consumer confidence (February)
(By Jamie McGeever; Editing by Deepa Babington)
By Jamie McGeever
