Morning Deal: Fed, BOJ Waiting Game | WTAQ News Talk | 97.5 FM · 1360 AM

By Jamie McGeever

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

Stocks around the world continued to rally on Monday from where they ended on Friday, halting last week’s wave of selling as investors closed positions ahead of a wave of economic data, policy decisions and earnings reports that will hit the market later this week.

There is little on the horizon to prompt strong investment in Asian assets on Tuesday – Wall Street was mixed, with the dollar rising and Treasury yields falling – suggesting that regional markets will be relatively well-supported but range-bound.

The main regional events investors will be watching will be Japanese jobs data, housing and retail data in Australia, as well as a handful of earnings reports from companies including Standard Chartered, Nomura Holdings and Samsung.

Asian stock markets appeared to have halted their recent downward trend. Several stock indices had their best day in two weeks on Monday, with the MSCI Asia ex-Japan index up 0.7%, the Hang Seng rising 1.3% and Japan’s Nikkei jumping 2.1%.

It was the Nikkei’s best day since April – an impressive rise from a three-month low, but it followed eight straight days of declines, its worst streak in almost three years.

Can Asia take heart from Monday’s US and global stock market results?

The recent rotation from big U.S. tech stocks to small caps stalled, with the Russell 2000 faring significantly worse than tech and the broader Nasdaq. The S&P 500 rose just 0.1% — a small gain but the first time in two weeks that the index has risen two days in a row.

The Bank of Japan’s decision on Wednesday hangs over Japanese assets. Sources told Reuters that an interest rate hike will be discussed and policymakers may also unveil a plan to halve bond purchases in coming years.

Money market pricing for a BOJ rate move remains biased towards a 10bp hike, but the tightening will be slow, with just 20bp of rate hikes priced in by year-end.

If the “normalization” of policy in Japan is so gradual, the yen will have a hard time getting much of a boost from Tokyo. It could get a bigger boost from the U.S. Federal Reserve and other central banks that cut interest rates more aggressively than markets currently expect.

U.S. interest rate futures traders are betting the Fed will remain unmoved on Wednesday, start easing in September and cut rates by about 65 basis points before the end of the year. The Bank of England meets on Thursday and could cut rates.

The dollar rose to a two-week high against a basket of major currencies on Monday, surpassing 154.00 yen as Wednesday’s Fed and BOJ meetings approach. Asian currency markets are mostly subdued, while China’s yuan is also taking a breather.

Here are the key events that could give markets a better direction on Tuesday:

– Unemployment rate in Japan (June)

– Building Permits in Australia (June)

– Samsung profits (Q2)

(Jamie McGeever Report)