Marketmind: Gloomy economic signals

5:49 pm Wednesday, January 25th, 2023

By Jamie McGeever

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

South Korea and the Philippines’ GDP data are on the Asian data docket for investors on Thursday, as the upbeat mood that has propelled global stocks and risk assets higher this year shows signs of fading.

Some gloomy signals from the latest U.S. earnings reports, a stream of tech sector layoffs and worries over global growth are overshadowing hopes that the Fed and other central banks will take their foot off the monetary tightening pedal.

The Bank of Canada was the latest to signal a pause, indicating on Wednesday it would likely halt further hikes after lifting its key interest rate to 4.5%. Some Asian central banks have done likewise in recent weeks.

Of course, the end of the tightening cycle could be in sight for many central banks because the lagged effects of previous rate hikes have not yet been fully felt and policymakers expect growth to slow.

Investors on Thursday will get the latest snapshot on the health of two Asian economies – the Philippines and South Korea – before world markets get the first estimate of U.S. growth in the October to December period later in the day.

South Korea’s economy is expected to have shrunk 0.3% in the fourth quarter of last year, the first quarterly contraction since the onset of COVID-19 in early 2020.

South Korea’s fortunes are closely tied to the global tech sector and its largest trading partner, China. Both are navigating choppy waters.

Still, Asian stocks are flying. MSCI’s broadest index of Asia-Pacific shares ex-Japan hit a seven-month high on Wednesday. Remarkably, the index is up 30% from an October low struck exactly three months ago, and it has risen 11 out of the last 13 weeks.

It may be due a correction, and if that comes on Thursday, it will be on greater volume than the three days of gains this week as some Asian markets re-open after the Lunar New Year holidays.

China, however, is still closed.

Three key developments that could provide more direction to markets on Thursday:

– South Korea GDP (Q4)

– The Philippines GDP (Q4)

– U.S. GDP (Q4 advance estimate)

(Reporting by Jamie McGeever in Orlando, Fla.; Editing by Josie Kao)