By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
Asian stocks are set to open on the defensive on Monday, taking the baton from a bruised Wall Street on Friday as worries over the U.S. economy and new tariff threats form President Donald Trump cast a cloud over world markets.
The local calendar is light, with New Zealand retail sales and inflation from Singapore the main data points, and Reserve Bank of New Zealand Deputy Governor Christian Hawkesby scheduled to speak in Wellington.
Investors will digest Germany’s election, which saw a victory for opposition conservatives and the far-right Alternative for Germany’s best ever showing.
The market tone on Monday will be one of nervousness and uncertainty, as investors seek the safety of bonds, gold and the U.S dollar. Japanese equity futures are pointing to a fall of 1.75% at the open.
Unexpectedly weak U.S. and European economic activity data set the tone on Friday, and reasonably market-friendly signs over the weekend around the prospects of a U.S.-brokered Russia-Ukraine peace deal are unlikely to improve it much.
Treasury yields fell last week, gold rose for an eighth week – its best run since 2020 – closing in on $3,000 an ounce, while the dollar stopped the rot of its recent selloff.
The Nasdaq fell 2.5%, its worst week in three months, lagging its global peers and indicating that U.S. outperformance that has been the hallmark of global equities in recent years has peaked.
As Bank of America strategists quipped, the ‘Magnificent Seven’ may now be the ‘Lagnificent Seven’.
The MSCI World index dipped 1% last week, euro zone stocks shed only 0.3% over the week after making a new record high, and the MSCI Asia ex-Japan index rose 1.5% for a sixth weekly gain in a row. That is its best run since November, 2022.
A rotation out of Wall Street into Europe and Asia appears to be underway, an one can see why – U.S. stocks are over-owned, valuations are expensive and positioning is stretched. Europe and Asia look attractive.
EPFR-tracked Europe equity funds in the third week of February recorded their biggest inflow since early 2022 and Chinese tech stocks listed in Hong Kong have surged a stunning 35% in the past six weeks.
That momentum is unlikely to last, and next week could see a retracement. But the major indices in mainland China, Japan and India are still in negative territory for the year – could their weak exchange rates tempt a wave of inflows?
Investors cheered President Xi Jinping’s meeting last week with Chinese tech and other business leaders, and the feel-good factor seems to be making up for nervousness around the yuan and uncertainty surrounding the threat of U.S. tariffs and potential trade war.
Here are key developments that could provide more direction to Asian markets on Monday:
– German election result
– Germany Ifo index (February)
– Singapore inflation (January)
(By Jamie McGeever, editing by Deepa Babington)
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