Morning message: Knock on some bumps

March 13 (Reuters) – A look at the day ahead in Asian markets from Lewis Krauskopf.

Monday can start a rocky week on the financial markets.

A banking explosion in the US is raising fears of global contagion risks, and these fears could be reflected in trading in Asia as the week begins. Regulators scrambled over the weekend to contain the fallout from Silicon Valley Bank’s sudden collapse late last week.

The bank’s failure has already taken its toll on the markets. Investors eased equity risk, with MSCI’s measure of world shares ending the week with its biggest two-day drop in about three months. Banking stocks were particularly hard hit, with the S&P 500 regional banking index down 18% for the week.

Meanwhile, measures of volatility in equity and fixed income markets reached their highest levels in 2023.

Even with new risks in the banking sector, a critical week of macro data is also likely to continue to drive trade as investors seek to understand how central banks will balance threats to economic growth and still simmering inflation.

US interest rates ended the week sharply lower after Friday’s mixed US jobs report that saw strong employment gains but moderating wage growth. Two-year US Treasury yields, which closely track the Federal Reserve’s policy expectations, saw their biggest drop since the 2008 financial crisis on Friday.

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Critical inflation data comes with Tuesday’s US consumer price index report, among the last key data before the Fed decides on its next interest rate move later this month. The European Central Bank appears poised for a half-point increase to its interest rate on Thursday.

Will the FOMC go back to jumbo-sized rate hikes?

China’s economy is also in the spotlight. The release of the country’s first retail and factory data for the year comes on Wednesday after the economy posted one of its weakest results in decades last year, with GDP rising just 3%.

Facing economic challenges, China unexpectedly kept its central bank governor and finance minister in their posts at the annual session of parliament on Sunday.

Here are three key developments that could give more direction to the markets on Monday:

– India CPI report for February

– Malaysia industrial production for Jan

– End of parliamentary session in China

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By Lewis Krauskopf; editing by Diane Craft

Our standards: Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed under the fiduciary principles to integrity, independence and freedom from bias.

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