By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
A big week for global markets kicks off in Asia on Monday with investors still navigating the blizzard of headlines around US President Donald Trump’s likely economic agenda, while trying to gauge whether the narrative of “we exceptionalism “American can lose its luster.
The dollar fell 1.8% last week, its worst week since November 2023. If the greenback consolidates, it shouldn’t really come as a surprise – it hit a two-year high earlier this month and the hedge fund position ‘Long’ was the position of ‘Long’. the biggest in nine years.
Dollar and U.S. stocks have been closely correlated, lifted by the huge wave of global capital inflows as investors bet heavily on U.S. AI, technology, growth and booming yields.
But if the dollar’s slide is a sign that the flame of “we exceptionalism” is beginning to flicker, is Wall Street ready for a cooling period?
The S&P 500 hit a new high last week and the Nasdaq moved closer. Index levels are historically high, valuations are stretched, and significant event risk looms this week in the form of the Fed policy meeting and “Big Tech” gains.
Scrutiny of American technology intensifies as ripples over a Chinese AI startup called Deepseek Spread. Deepseek recently launched a free open source AI model that it claims is at least the equal of more established models like Chatgpt on many levels, but built at a fraction of the cost.
It’s early, but if this shines a critical light on the huge sums being spent on AI by American tech companies, Wall Street could falter.
Monday’s Asian calendar is dominated by index reports from China’s “official” Manufacturing and Services Purchasing Index for January.
A Reuters poll suggests the manufacturing PMI will be unchanged from the previous month at 50.1. On the one hand, this would represent the fourth consecutive month of expansion in the sector. It would also indicate almost no growth for the second month in a row.
Data on Friday showed that profits at Chinese state-owned enterprises virtually evaporated, rising 0.4% from a year earlier. Broader industrial sector profit figures are due this week, possibly as soon as Monday, and are expected to confirm that 2024 was the worst year in a decade.
Investors will give their second-day verdict on Friday’s Bank of Japan rate hike. The initial take seemed to be that this was a ‘hawkish hike’, but Japanese silver markets were still pricing in just another 25 points of this year’s base squeeze, unchanged from levels before the Friday. This suggests that BOJ’s guidance was actually quite neutral, and Japanese stock futures are pointing to a sharp increase on Monday.
