From products, dollars, quick break; Indonesia has set prices.
by Jamie MacGyver
(Reuters) – A look at the day in Asian markets.
A pause in global bond sales took some of the wind out of the dollar’s sails and allowed stocks to bounce back early on Tuesday, but Wall Street’s wobble ahead of U.S. inflation data could put Asian markets on the defensive on Wednesday.
A loss of steam in the dollar and Treasury yields should provide some welcome respite for emerging and Asian markets. But the reversal of US stocks may prove to be short-lived, especially when the US CPI inflation number rests after the close of Asia.
Asian markets were buoyant on Tuesday. MSCI’s Asia ex-Japan index jumped more than 2.5% from a five-month low and blue-chip Chinese shares jumped more than 2.5% after the US lifted its tech curbs as regulators pledged more support for markets and domestic chip companies.
However, Japanese stocks went the other way after Bank of Japan Deputy Governor Ryozo Himino hinted at the possibility of a rate hike next week. The Nikkei 225 index posted its biggest decline in two-and-a-half months, down 1.8 percent.
That is the backdrop for the regional environment that opens on Wednesday, with the main environmental event being Bank Indonesia’s policy decision. Due to recent currency volatility, BI is widely expected to keep its key interest rate at 6.00%.
With central bank inflation at low levels of 1.5%-3.5%, monetary policy is being steered toward stabilizing the rupiah, which is down 7% against the dollar from its September peak.
Like most developing countries, Indonesia has been hit hard by rising US bond yields and a dollar “wrecking ball”, tightening financial conditions and limiting the ability of the BI to ease policy.
According to Goldman Sachs, Indonesia’s financial situation has been deteriorating significantly since the end of September, mainly due to long-term inflation and declining stocks. They are now very tight from October 2023, and close to tight from October 2022.
As U.S. President-elect Donald Trump’s January 20 inauguration approaches, the threat of a global trade war and punitive U.S. tariffs continue to weigh on market sentiment in many countries — especially China.
Chinese President Xi Jinping, who met with European Council President Antonio Costa on Tuesday, said China and the European Union have a strong “symbiotic” economic relationship and that Beijing hopes the bloc will be a “faithful partner for cooperation.”
Meanwhile, Trump said on Tuesday he would create a new department called the Foreign Revenue Service to collect “tariffs, taxes and all revenue” from foreign sources.