Nikkei Rises in Asian Trade; China, India on Holiday

Asian markets saw a slight increase on Monday, with the Nikkei in Japan rising by 0.55% to 32,025 points, and the Topix index also seeing a 0.45% increase. This comes amidst a relatively quiet trading day, with the stock markets in China, Hong Kong, and India closed for public holidays. As such, investors are taking this time to evaluate recent economic data from China and Japan, while also anticipating the release of the US PMI data, which is expected later in the American session on Monday.

China is currently observing its Golden Week holiday, which has resulted in the closure of its markets. Economic data released from China over the weekend showed that the Chinese Caixin/S&P Global Manufacturing Purchasing Managers’ Index (PMI) fell to 50.6 in September, down from August’s reading of 51.0. This was below market expectations, which had predicted a figure of 51.2. The Service PMI also saw a decrease, coming in at 50.2, compared to 51.8 in the previous month. These figures suggest that China’s economy, the second-largest in the world, is showing signs of stabilization. However, there are concerns about the future, with potential issues including a downturn in the housing market and a significant decrease in exports.

In Japan, the Bank of Japan (BoJ) released a summary of opinions from their Monetary Policy Meeting, which took place on the 21st and 22nd of September. The summary stated that the BoJ does not need to make further adjustments to YCC as long-term rates are fairly stable. The end to negative rate policy must be tied to the success of achieving a 2% inflation target. One board member noted that given recent foreign exchange and oil price movements, there is a chance inflation may not slow much and could exceed expectations.

BoJ Governor Kazuo Ueda stated over the weekend that the bank still has “a distance to go” before it can exit its ultra-loose monetary policy. The overall business conditions of large manufacturing companies in Japan have improved in the third quarter (Q3). The Japanese Tankan Large Manufacturing Index for Q3 came in at 9.0, up from the previous quarter’s reading of 5.0 and exceeding expectations of 6.0.

The BoJ also announced an unscheduled purchase of Japanese government bonds (JGB) on Monday. This move is designed to curb the current surge in yields; the 10-year JGB yield hit its highest level since September last year, reaching 0.775% in the early Asian trading session.

Meanwhile, in India, the Reserve Bank of India (RBI) will commence a three-day meeting on Wednesday, with the interest rate decision expected to be announced on Friday. The RBI is predicted to maintain a status quo on interest rates for the fourth consecutive time at its upcoming monetary policy meeting.

Looking forward, market participants will be paying close attention to the US ISM Manufacturing PMI for September, as well as a speech by Fed Chair Powell, both of which are scheduled for Monday.