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Dec 19 (Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.

There’s a reason investors have been warned not to fight the Fed, but sometimes they still have to learn the hard way.

With the world’s second most powerful central bank also standing shoulder to shoulder with the Fed, markets are sure to get a bloody nose.

This is, in fact, what happened last week. Wall Street and global stocks were in a sea of ​​red after the Fed and European Central Bank raised interest rates by 50 basis points in the clearest signals yet that they are far from done.

Of course, the Fed is closer to the end of its rate hike cycle than the ECB, which is probably why interest rate markets continue to bet on Fed Chairman Jerome Powell late next year, even though he’s adamant that there won’t be one. be .

Fears of a US recession and global slowdown intensified on Friday with the release of the weakest US PMI readings in two years. Earlier in the week, US retail sales and some Chinese data came in well below forecasts.

And this is an economy in which central banks around the world are still raising interest rates.

This sets the tone for the week in Asia, where key points will be monetary policy decisions in Japan and Indonesia, minutes of the RBA’s latest policy meeting and inflation figures from Japan, Hong Kong, Malaysia and Singapore.

The BOJ is expected to keep its key lending rate at -0.10% and reaffirm its “yield curve control” commitment to set the 10-year government bond yield at 0.25%.

But in a marked departure from the past few decades, hawkish voices within the BOJ are making themselves heard just as Governor Haruhiko Kuroda’s term in office approaches in March.

The decision was made three days before the publication of November inflation figures. Annual core CPI inflation is expected to rise to 3.7% in November from 3.6% in October, marking a 41-year high.

diagram
diagram

Indeed, Kyodo reported on Saturday that the Japanese government is set to revise a decades-old joint statement with the BOJ that commits the central bank to 2% inflation “at the earliest,” making the 2% inflation target a more flexible target. .

Bank Indonesia, meanwhile, is expected to implement its own version of the Fed’s muddle, cutting the pace of rate hikes to 25 bps from three consecutive 50 bps moves. Most analysts expect the seven-day reverse repo rate to rise to 5.50% from 5.25%.

The blue year is coming to an end. Will there be a Santa rally, even a mini one, during the last week before Christmas?

Three key developments that could provide more direction to markets on Monday.

– German Ifo index (December)

– ECB de Guindos is speaking

– US NAHB Housing Market Index (December)

Reporting by Jamie McGever in Orlando, Florida. Edited 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 to integrity, independence and impartiality in accordance with the principles of trust.

Jamie MacGyver

Thomson Reuters

Jamie MacGyver has been a financial journalist since 1998, reporting from Brazil, Spain, New York, London and now back in the US. Focus on economics, central banks, policy makers and global markets, especially foreign exchange and fixed income. Follow me on Twitter @ReutersJamie

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