Marketmind: Happy Friday, it's AI boom time
By Jamie McGeever
(Reuters) - A look at the day ahead in Asian markets from Jamie McGeever.
Asian stocks could be poised to end a volatile and dramatic week on a strong note on Friday, especially tech, lifted by the Nasdaq's best day in three weeks on Thursday and hope that U.S. lawmakers are close to a deal on the debt ceiling.
Regional drivers on Friday include the latest snapshots of consumer price inflation in Tokyo, Australian retail sales, CPI inflation in Malaysia and manufacturing output in Singapore.
Local currencies, on the whole, are under pressure against a rampant dollar, which hit a two-month high on an index basis on Thursday as Fed rate expectations and U.S. bond yields surged higher.
The dollar broke above 140.00 yen for the first time in six months and could extend those gains on Friday if Tokyo inflation figures for April are on the weak side, taking the heat of the Bank of Japan to rethink its ultra-loose policy.
Annual core CPI inflation in the Japanese capital is expected to ease to 3.3% in April, a welcome sign for BOJ that inflation has perhaps topped out. Policymakers won't be complacent though - core CPI in Tokyo fell to 3.20% in March from 4.0% in January, only to rise again in April.
The dollar is on solid ground though, supported by the implied Fed terminal rate rising to a post-banking shock peak above 5.30%. What's more, the rate cuts long priced in for the second half of the year are getting whittled away too - down to 35 basis points now from around 100 bps earlier this month.
A strengthening dollar, higher implied Fed rates and rising U.S. bond yields often dampen risk appetite but the momentum in tech stocks, and in particular the euphoria around artificial intelligence, is something to behold.
A blowout forecast from Nvidia Corp sent the U.S. chipmaker's stock soaring 25% to a record high on Thursday, fueled a rally in AI-related companies, and lifted the Nasdaq 1.7%.
An index of U.S.-traded 'FANG' mega tech stocks is up a stunning 55% this year - perhaps some of that bullishness will spill over into Asian markets and break three-day losing streaks in the MSCI Asia ex-Japan index and the Hang Seng tech index.
While there is still no official deal in Washington on the debt ceiling, investors are acting like there will be one soon - Democrats and Republicans are just $70 billion apart on discretionary spending cuts which, once agreed, should seal the deal.
It's a relatively small amount, and just as well given the that Treasury Secretary Janet Yellen insists the government will run out of cash next Thursday. Figures on Thursday showed that Treasury's cash balance is down to just $49.47 billion.
On the Asian data front, Malaysian inflation is expected to ease to 3.3% in April from 3.4%, which would be the lowest in almost a year and further below last August's cycle peak of 4.7%.
Singapore's April manufacturing output, meanwhile, is seen slumping 0.7% from March and 4.4% from April last year. The wide range of economists' forecasts, however, suggests markets should not be surprised if the numbers are well off consensus.
Here are three key developments that could provide more direction to markets on Friday:
- Tokyo CPI inflation (April)
- Malaysia CPI inflation (April)
- Australia retail sales (April)
(By Jamie McGeever)