Marketmind: U.S. shutdown relief vs mixed China PMIs

By Jamie McGeever

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

An early burst of positive sentiment – or relief – after the U.S. Congress agreed a last-minute deal to prevent a partial federal government shutdown could give Asian markets a boost at the open on Monday.

But Chinese purchasing managers index data over the weekend, which pointed to mixed levels of services and manufacturing activity last month, may put a dampener on that. Other PMI data from across the region will also be released this week.

Investors will be looking to start the fourth quarter on a positive note after a pretty awful third quarter. Stocks, bonds and non-dollar currencies around the world mostly fell, to varying degrees, as investors adjusted to the idea that U.S. interest rates will not come down as quickly as they had hoped.

China’s markets will be closed for much of the week for the Golden Week holiday, and investors will surely welcome the break – the property sector is imploding, money is flowing out of Chinese assets, the currency is under heavy pressure and the economy is struggling.

The International Monetary Fund is a little more optimistic though, saying last week that recent policy support from Beijing is having a positive effect and stabilizing the economy.

The next step is for growth to re-accelerate after coming in well below forecasts all year. Economic surprises are still negative, but have recovered from the lows of the summer, levels that were historically consistent with periods of extreme economic and financial stress – 2008, 2015 and 2020.

Monday’s batch of PMI reports include the latest snapshots from Australia, Japan and Indonesia, while Japan’s closely watched ‘tankan’ survey of business sentiment and activity will also be released.

The first trading week of the fourth quarter gets underway with Asian and Pacific market-moving events likely to include central bank policy decisions from Australia, India and New Zealand, and a flood of inflation data from across the region.

The inflation data includes the latest readings of consumer prices from Indonesia, South Korea, the Philippines, Thailand and Taiwan, all for the month of September.

Meanwhile, the Reserve Bank of Australia, Reserve Bank of New Zealand and Reserve Bank of India are all expected to keep their key interest rates on hold at 4.10%, 5.5% and 6.5%, respectively. All eyes are on policymakers’ guidance.

Investors reckon the RBA might have one last hike in it this year. But many other central banks have probably ended their rate-hiking cycles, so the question now is how long the ‘higher for longer’ pause lasts and when the easing cycles begin.

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

– Australia, Japan, Indonesia manufacturing PMIs (September)

– Japan tankan survey (Q3)

– Bank of Japan summary of opinions from Sept 21-22 policy meeting

(By Jamie McGeever; Editing by Richard Chang)