Marketmind: Soft landing hopes fuel that Friday feeling

By Jamie McGeever

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

Asian markets are poised to end the week on a positive note, spurred by a powerful rally on Wall Street and growing optimism that the Fed might achieve the holy grail of a ‘soft landing’ for the U.S. economy.

Thursdays surge across U.S. markets followed the stunning Chinese trade figures for March earlier in the day that suggested global demand may be stronger than most people had anticipated.

The upside surprise to the export and trade balance figures was so big that Chinas broader economic surprises index jumped to its highest in 17 years, and one of the highest on record.

China economic surprises index https://fingfx.thomsonreuters.com/gfx/mkt/zjvqjaookpx/ChinaSurprises.png

Little wonder investors in Asia go into the final day of the week in buoyant mood, especially after U.S. data on Thursday showed cooling inflation and labor market pressures, trends that could convince the Fed to pause its rate-hiking campaign.

The Nasdaq surged 2% for its best day in a month, the VIX ‘fear gauge’ of S&P 500 index volatility fell to its lowest in over two months and U.S. bond market volatility fell back below the pre-banking shock levels of a month ago.

Another good indication of how broad the ‘risk on’ rally is globally is the dollar. It continues to weaken and on Thursday fell to its lowest in over two months – it is a whisker away from a one-year low.

The dollar is on track for its biggest weekly fall in three months and has weakened five weeks in a row – a downturn not recorded since mid-2020.

Dollar index – weekly change https://fingfx.thomsonreuters.com/gfx/mkt/dwpkdjllgvm/USDindex.png

Asian currencies are enjoying the ride too – Indonesia‘s rupiah which hit an eight-month high on Thursday, and Singapore’s dollar rose to a two-month peak.

The ‘Sing dollar’ is liable to move further on Friday, with traders braced for first quarter GDP growth data and the central banks semi-annual monetary policy decision.

The Monetary Authority of Singapore (MAS) is expected to tighten monetary policy for the sixth time in a row, amid persistent price pressures in the Asian financial hub due to global supply chain disruptions.

A slim majority of analysts polled by Reuters expect MAS to tighten, although this could be the last time if the growth picture is any guide – the first estimate of Q1 GDP is expected to show growth slowing sharply on an annual basis and shrinking from the previous quarter.

Lastly, Indian wholesale price inflation is expected to virtually halve in March to a 1.87% annual rate from 3.85%. It was 16% less than a year ago.

Indian WPI inflation https://fingfx.thomsonreuters.com/gfx/mkt/klvygmbmxvg/IndiaWPI.jpg

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

– IMF/World Bank spring meetings in Washington

– Singapore Q1 GDP and policy decision

– India WPI inflation (March)

(By Jamie McGeever; Editing by Josie Kao)