27 January 2025

Written by Jamie McGeever

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

A big week for global markets kicks off in Asia on Monday, with investors still navigating headlines about US President Donald Trump's potential economic agenda, while trying to gauge whether the “American exceptionalism” narrative may be losing its luster.

The dollar fell 1.8% last week, its worst week since November 2023. If Greenback is consolidating, it shouldn't really be a surprise — it hit a two-year high earlier this month, and the “Long” hedge fund position was the largest in Nine years.

Dollar and US stocks have been closely linked, lifted by the huge wave of global capital flows as investors bet heavily on US AI, technology, growth and booming returns.

But if the dollar slide is a sign that the flame of “American exceptionalism” is starting to flicker, is Wall Street preparing for a cooling off period as well?

It hit a new high last week and the NASDAQ is close. Index levels are historically high, valuations are stretched, and big event risks loom this week in the form of the Fed policy meeting and “big tech” earnings.

Scrutiny is increasing on US technology as ripples have been made from a Chinese AI company called Deepseek. Deepseek recently launched a free and open source model that it claims is at least equal to more established models like ChatGPT on many levels, but built at a fraction of the cost.

It's early days, but if this shines a critical light on the huge sums US tech companies are spending on artificial intelligence, Wall Street could cringe.

Monday's Asian calendar is dominated by China's “official” Manufacturing and Services Managers' Index reports in January.

A Reuters poll suggests the manufacturing PMI will be unchanged from the previous month at 50.1. On the one hand, it represents the fourth consecutive month of expansion in the sector. It also indicates almost no growth at all for the second month in a row.

Data on Friday showed profits at Chinese state-owned enterprises last year virtually evaporated, rising just 0.4% a year earlier. Broader industrial sector earnings numbers are due this week, possibly as early as Monday, and are expected to confirm that 2024 was the worst year in decades.

Investors will deliver their verdict on the second day in the Bank of Japan's rate hike on Friday. The initial take seemed to be that it was a “spike in charity,” but Japanese financial markets are still pricing in another 25 basis points of tightening this year, unchanged from pre-Friday levels. This suggests that BOJ guidance was actually very neutral, and Japanese stock futures point to a strong rally on Monday.

Meanwhile, South Korean markets will be sensitive to news that prosecutors have indicted President Yeon Suk-yul on charges of leading a rebellion with his short-lived martial law imposed on December 3.

Here are the key developments that could provide further guidance to markets on Friday:

– “China Official” PMIs (January)

© Reuters. File photo: Employees work on an electric vehicle (EV) production line during an organized media tour to a factory under Jiangling Group Electric Oper

– Japan Leading Index (November)

– Germany Ifo Index (January)

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