Asian markets are poised to trade in mixed manner

Asian markets are poised to trade in a mixed manner, as market participants strive to decipher a complex macroeconomic landscape and await additional data for better visibility on earnings and future projections. The Federal Open Market Committee (FOMC) meeting, scheduled for this week, is in the spotlight as its outcomes could steer the course of U.S. interest rates, as suggested by policymakers. Given the scarcity of relevant data today and the ongoing media blackout from the FOMC, any unexpected news could potentially sway the market direction, especially as we approach the crucial Fed decision next week.

In the Asian region, the spotlight is on China, where market participants are hoping for further economic stimulus. On June 2, Chinese social media platforms were abuzz with speculations that Beijing might be contemplating aid for the embattled property sector. This followed the implementation of property relief measures in Qingdao and is amidst the rising fears of a substantial property market slump that could hamper post-Covid recovery and potentially trigger a recession. Despite these hopes for Beijing’s intervention, scepticism about its effectiveness persists. Some EM desks note that with the power structure becoming more centralized, it could be challenging for China’s top policymakers to address each economic issue.

On the geopolitical stage, tensions are rising. The White House has expressed concerns about China’s escalating military assertiveness and is seeking justifications from Beijing for its actions. There is an escalating risk of missteps leading to unsafe intercepts in international airspace. Any escalation could instigate a risk-off sentiment, leading to capital outflows from Asian markets, particularly impacting credit and equities.