Asian stock markets followed Wall Street lower Friday on worries economic recoveries might fade as coronavirus cases increase in the United States and some other countries.
(Bloomberg) -- Emerging-market investors are getting selective even after bonds, stocks and currencies kicked off the second half of the year on a high note.Money managers are questioning whether the developing world’s economic troubles will be short-lived as massive central-bank stimulus bolsters demand for risky assets. Emerging-market dollar bonds posted their longest weekly winning streak since February in the five days through Friday. Stocks and currencies rallied on Monday.Inflation data in at least 10 developing economies, including Russia and Mexico, will provide clues on how much more room there is for policy makers to reduce interest rates, with many already at record lows. Malaysia’s central bank will likely cut borrowing costs this week, while Peru and Israel will probably remain on hold.“We are mainly focused on tracking mobility data to gather how different the pace of recovery is from country to country as we believe this will influence the level of attractiveness of the individual currencies,” said Anders Faergemann, a London-based portfolio manager at PineBridge, which manages about $96 billion. “We expect some central banks will continue to cut interest rates, but the bulk of rate cuts are behind us.”The majority of developing-nation central banks will maintain “an exceptionally easy monetary policy” for some time, Goldman Sachs Group Inc. analysts, including Andrew Tilton and Kamakshya Trivedi, wrote in a report. While growth will bounce back relatively sharply toward the end of this year and into 2021 as developing economies emerge from lockdowns, the crisis will leave a lasting effect on the level of their gross domestic product, they said.While BNP Paribas Asset Management continues to favor emerging-market credit and is increasingly positive on currencies, it isn’t as optimistic on local rates.“The shape of the recovery could be problematic as markets are increasingly pricing in a V-shaped recovery, with still accommodative policies,” said Jean-Charles Sambor, the London-based head of emerging-market debt at the firm, which oversees the equivalent of about $460 billion. Emerging-market “gains will not be as strong as in the second quarter.”EM Weekly Podcast: China’s Rally; CPI Watch; Argentina DeadlineHere’s what investors will be watching this week:Rate DecisionsBank Negara Malaysia will probably cut its overnight policy rate by 25 basis points on Tuesday, according to economists’ median estimateThe nation’s benchmark 10-year government bond yield traded around 2.8% last week after briefly spiking above 3% in mid-JuneOn Friday, Malaysia is expected to report a smaller decline in industrial production in May compared with April. It will also release manufacturing sales dataRead: Mahathir Risk Looms for Malaysian Bonds After Outlook CutPeruvian policy makers will probably hold interest rates steady on Thursday and reiterate plans to keep them low, according to Bloomberg Economics. The sol was one of the worst-performing currencies in emerging markets last weekAll of the economists surveyed by Bloomberg expect Israel to keep its benchmark rate at 0.1%The Bank of Israel wants a primarily fiscal response to the Covid-19 crisis, and will provide support including expanding a record bond-purchasing commitment if needed to keep borrowing costs low, Governor Amir Yaron said in JuneRead: After Fed Cue, Israel Looks for Answers to Second Virus WaveSri Lanka, Serbia and Mauritius will also decide on interest rates this weekCroatia VotesCroatia’s ruling party scored a surprise victory in Sunday’s general election, defying predictions for a tight race and putting it within touching distance of a majority in parliament. Croatia’s Eurobond due 2029 rose a 15th dayRead more: Croat Ruling Party to Keep Power After Surprise Election TriumphEconomic DataContinued signs of recovery in China may help support risk assets as the largest developing economy is forecast to see continued credit growth in JuneThe nation will announce inflation data for June on Thursday that is forecast to show an uptick in consumer prices for the first time in four months. The pace of declines in factory prices is seen slowing due to a rebound in commodity prices, according to Bloomberg EconomicsChina will also release credit data between Friday and next Wednesday that’s expected to show continued growth amid supportive measures by the People’s Bank of China. PBOC Governor Yi Gang said in June that he expects 20 trillion yuan ($2.8 billion) of new yuan loans this yearBetter-than-expected numbers could help propel Chinese stocks higher, after the CSI 300 Index surged to a five-year high last weekIndia will announce May industrial production on Friday. While economists forecast another substantial slump, signs of a rebound in demand are emerging in June data. A falling jobless rate and improving factory outlook has helped the S&P BSE Sensex Index rally for the third consecutive week in the five days through FridayTaiwan’s end-June foreign exchange reserves rose $4.18 billion from the previous month to $488.7 billion partly because of the monetary authority’s measures to smooth currency fluctuations after large capital inflows caused volatility, Taiwan central bank said MondayThe benchmark Taiex Index erased year-to-date losses Monday after rallying for the past three weeksTaiwan will release trade and inflation data on Tuesday. Exports are seen falling more than the previous month, narrowing the country’s trade balance. The pace in decline in consumer inflation is expected to easeForeign reserves and inflation data for the Philippines are due Tuesday while the country will announce its trade balance on FridayInflation in Russia likely accelerated in June, while remaining well below the central bank’s 4% target“That may reflect one-time markups relating to the reopening of the economy, rather than the start of a trend,” Bloomberg Economics said in a report. “Further ahead, soft demand is likely to weigh on inflation, which creates space for a bit more monetary easing”While Brazilian inflation probably ticked up in June, Bloomberg Economics expects it to remain well below the target when figures are released on WednesdayRetail sales data for May due to be released on the same day will show the impact of the rapidly-spreading coronavirus on consumer behaviorMexico will post June inflation figures on Thursday and May industrial production data on Friday, which will also flag the effects of the virus and measures to contain itMinutes from the central bank’s June meeting, expected on Thursday, will provide context for the decision to cut the interest rate by 50 basis pointsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Asian stock markets rose Monday as investors looked ahead for data they hope will support optimism about a global economic recovery.