Jamie McGeever takes a look at the day ahead in Asian markets.
The Chinese Politburo holds its first meeting this week to discuss the policies that will set Beijing's economic direction over the next year, and Australia and India are the main set-piece events in Asia this week.
The investors go into the week with a 'risk on' bias, supported by markets dovish interpretation of Fed Chair Jerome Powell's speech on the U.S. economic outlook and the solid U.S. employment report for November the week before.
The MSCI World equity index has gone up two weeks in a row, and the MSCI Asia ex-Japan index has gained five weeks in a row, its best run for two years, while the dollar is under pressure.
If U.S. financial conditions continue to relax and implied market volatility remains well-anchored, bulls will stay on the front foot. On the Asian policy front, there is more evidence that the burst of jumbo hikes is over, and will support risk appetite.
On Tuesday, the Reserve Bank of Australia is expected to raise rates by 25 basis points to more than 3% for the first time in a decade. That would be the third quarter-point increase in a row, after four half-point increases.
The Reserve Bank of India is expected to raise rates by 35 basis points, a deceleration from three consecutive 50 bps hikes on Wednesday.
The Communist Party's Politburo meeting this month will be the main focus this week on China, with the government's strategy and guidelines for the year ahead being laid out by the Communist Party.
The challenges to revitalize the economy, boost growth, shore up the property sector and navigate a smooth transition out of zero-COVID policy are immense and are well-known, and come against a backdrop of unprecedented protests and social unrest.
Analysts at Goldman Sachs expect policymakers to reiterate a'supportive' position in light of weak economic activity recently.
We might get more hints on the future direction of COVID control policies from this meeting - for example, if policymakers claim victory in the past COVID control and delete the not mentioning of 'dynamic Zero COVID policy, we would view these as clear signs of more relaxation of COVID control in the near future, they wrote in a note on Friday.
If they do, China's yuan could strengthen through the 7.00 per dollar level for the first time since September 20, 2022, it is expected that the currency's price could go up for the first time since September 20, 2022. It appreciated four days in a row, and last week it was the biggest since Beijing revalued the currency and shifted to a more flexible FX regime in July 2005.
Three key developments that could give more direction to markets on Monday are: