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Asia wrap: Muted start to the week

The reopening of China's markets after the Lunar New Year holiday typically garners attention, given China's significant influence on global trade and economic activity. However, the market reaction has been muted, possibly influenced by the US public holiday and the overall quiet week for US data.

While increased travel and spending in China during the Lunar New Year holidays may provide some insights into consumer sentiment and economic activity, it may not be sufficient to significantly impact local or global growth outlooks or financial markets on its own.

It's a quiet week ahead for the US  regarding economic data releases and events. However, it's important to note that just because things seem quiet doesn't mean nothing will happen. Sometimes, the quiet moments can be the most unsettling of times. But for today, there is hardly a ripple.

Still, there's a high chance of an expanding conflict in Gaza as the Israeli military is expected to launch an offensive in Rafah. At the same time, many geopolitical observers will be paying attention to Russia, where the Kremlin has been working to suppress public displays of mourning for Aleksei Navalny. Navalny's death, which was attributed to "sudden death syndrome," is seen by many as yet another example of tyranny.

The key events to watch include Nvidia's earnings release on Wednesday and the release of the January FOMC minutes. While the minutes may provide insight into the Fed's discussions and future policy directions, the market sentiment has already shifted away from expecting rate cuts in the near term.

So far, that adjustment (less in the way of rate-cut premium) hasn't impacted equities. Suggesting stocks can hold up as long as the market doesn't begin to suspect that the three cuts tipped by the last SEP are in doubt.

The discussion around the Fed's quantitative tightening (QT) tapering is also relevant, and traders may be looking for more clarity on the timing and parameters of the tapering process. Any hints or indications from the FOMC minutes regarding this matter could influence market expectations.

Additionally, existing home sales data and flash PMI prints for February will be released, with the latter potentially having a temporary market-moving impact. Investors will also be keen to assess any evidence suggesting the impact of the US retail sales miss for January on the broader economy.

Outside of the US, updates on the Ifo survey in Germany and GDP data from Israel for the fourth quarter will be notable. These indicators may offer insights into these regions' economic conditions and performance amid ongoing challenges and geopolitical tensions.

While the economic calendar may appear quiet, geopolitical developments and any surprises in the data releases could still lead to market volatility and impact investor sentiment.

Author

Stephen Innes

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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