By Jamie McGeever
(Reuters) - A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.
China's latest interest rate decision will be the main focus for Asian markets on Monday, with investors also eyeing third-quarter GDP from Thailand, and trade figures from Malaysia and Taiwan.
Trading activity and volumes in Asia this week will be lighter than usual owing to the U.S. Thanksgiving holiday later in the week, but sentiment appears to be holding up well thanks to a general loosening of financial conditions.
Bond yields around the world, led by Treasury yields, are falling as inflation pressures ease, economic activity cools and oil prices slide.
For the most part, investors are riding the wave - world stocks, Wall Street, and Japan's Nikkei last week all rose for a third straight week, and Asia ex-Japan rose 3%. China's blue chip CSI300 index, however, had its first fall in four weeks.
Equity and currency market volatility are well anchored, and while bond market volatility is more elevated, it is in the middle of its range over the past year excluding the U.S. banking shock in March.
On Monday, the People's Bank of China is widely expected to leave lending benchmark rates unchanged. All 26 market watchers in a Reuters poll expect the one-year and five-year loan prime rates to be held steady at 3.45% and 4.20%, respectively.
Most economists believe China's economy needs more stimulus, but this would expand downward pressure on the yuan and risk increasing capital and portfolio outflows.
Goldman Sachs analysts estimate that net FX outflows in October totaled $41 billion, compared with $75 billion in September. That's over $100 billion outflows in just two months.
It is why Beijing's policy decisions are so important: as long as the interest rate spread remains heavily against the Chinese yuan, these outflows will likely persist.
But authorities seem determined to support the yuan and steer it away from the 7.30 per dollar level. Their efforts are working - the dollar on Friday dipped below 7.21 yuan for the first time in three months.
Also on Monday, figures from Bangkok are expected to show that Thailand's economy grew at a 2.4% annual rate in the third quarter, up from 1.8% in the previous quarter, boosted by exports and tourism. On a quarterly basis, GDP likely grew a seasonally-adjusted 1.2% from 0.2% in the second quarter.
Later in the week the Reserve Bank of Australia releases minutes of its Nov. 7 policy meeting and Bank Indonesia is expected to keep its key interest rate on hold at 6.00%. But perhaps the most important release will be Japanese consumer price inflation on Friday - it could be critical for Bank of Japan policy.
Core annual inflation is expected to have risen to 3.0% in October from a 13-month low of 2.8% in September, according to a Reuters poll.
Here are key developments that could provide more direction to markets on Monday:
- China interest rate decision
- Thailand GDP (Q3)
- Malaysia trade (October)
(By Jamie McGeever; Editing by Diane Craft)