Asian shares fell on Monday as investors anticipated a week filled with central bank meetings, including the Federal Reserve and the Bank of Japan. These meetings will be closely watched for the global monetary policy outlook. Despite the negative sentiment in Asia, S&P 500 and Nasdaq futures showed modest gains. The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5%, with Australia’s share market dropping 0.7% and Hong Kong’s Hang Seng index falling 0.7%.
The focus in the Asian market was on Chinese property developers listed in Hong Kong, which experienced a 2% decline, mainly due to a 20% plunge in China Evergrande Group after police detained some of its staff. Additionally, Chinese trust firm Zhongrong International Trust Co announced that it was unable to make payments on some trust products on time. Despite signs of stabilization in the Chinese economy, the property market continues to be a concern.
This week, global central banks will be in the spotlight, with five of the 10 most heavily traded currencies having rate-setting meetings, including the U.S. Federal Reserve. The market is anticipating a pause from the Fed, but investors will closely watch the economic projections and statements from Chair Jerome Powell. Markets are expecting around 80 basis points of cuts next year. The Bank of England is also expected to hike rates for the 15th time, while Sweden’s Riksbank is anticipated to raise rates by 25 basis points.
The Bank of Japan’s meeting on Friday is seen as a key risk event, with investors looking for any signs of a faster move away from the ultra-loose policy. Recent comments by Governor Kazuo Ueda have already caused yields to rise. Last Friday, U.S. stocks ended lower due to industrial labor action and rising Treasury yields. Cash Treasuries were not traded in Asia with Tokyo closed, but yields remained higher, suggesting expectations of higher rates ahead.
In the currency markets, the U.S. dollar remained strong, near its six-month high against major currencies. The euro recovered slightly, and oil prices rose after reaching 10-month highs on Friday, putting upward pressure on inflation. Gold prices also saw a modest increase.
Overall, the Asian market is bracing for a week of central bank meetings, with potential implications for global monetary policy. The focus will be on the Federal Reserve’s updated economic projections, the Bank of England’s rate hike, and any signs of policy changes from the Bank of Japan.