Marketmind: China hopes, U.S. big tech fire up markets

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.

Asian stock markets will open strongly on Wednesday if the previous day’s China- and U.S.-fueled momentum doesn’t wilt, as investors brace for a triple whammy of major central bank policy decisions over the coming 72 hours.

On the regional data front, Australian consumer inflation grabs the spotlight. Economists expect inflation to have slowed in June and over the second quarter, which could lean investors toward thinking interest rates have peaked at 4.10%.

It’s not often China is the source of much optimism for investors these days, but that it exactly where markets find themselves after the country’s top leaders on Monday pledged to ramp up support for the struggling economy.

China’s blue chip equity index rose nearly 3% for its best day this year, and Chinese property stocks surged 8% for their biggest rise this year too. Hong Kong’s main property stocks index jumped 14%, the biggest rise since March last year.

Beijing’s top policy-making Politburo said it will implement macro adjustments “in a precise and forceful manner” to support an economy undergoing a “tortuous” post-COVID recovery.

Fine words and sentiment, but as analysts at Investec note, no details on actual policies were forthcoming. This is what will determine China’s recovery, so until more clarity emerges, investors’ optimism may fade as quickly as it appeared.

The mainland property index is still down 13% this year and the Hong Kong-based index is down 25%. Maybe they are cheap enough to draw in buyers, but the problems run deep.

That said, MSCI’s Asia ex-Japan equity index on Tuesday ended a six-day losing streak and rallied 2%. The rose for the 10th session of the last 12, reaching its highest level since April last year, and the also climbed to a new 15-month high.

Surprisingly strong U.S. consumer confidence, growing faith in an economic ‘soft landing’, and the Artificial Intelligence buzz around juicy earnings reports from Big Tech firms all contributed to the latest Wall Street rally.

Strong results from Microsoft (NASDAQ:) and Alphabet (NASDAQ:) after the bell will only strengthen the upbeat tone in Asia on Wednesday too.

All this comes ahead of the first of three major central bank policy decisions this week – the Federal Reserve is expected to raise rates 25 basis points on Wednesday, followed by a similar move from the European Central Bank on Thursday and the Bank of Japan holding the line on Friday.

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

– Australia inflation (June)

– Singapore industrial production (June)

– U.S. interest rate decision

(By Jamie McGeever)

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