Markets bide time as policymakers plot next moves

SYDNEY: Hong Kong's Hang Seng index was a bit of an outlier on the downside with a drop of 1.5%, dragged lower by Chinese property developers which tumbled more than 5%. With a quarter-point hike from both the Federal Reserve (on Wednesday) and the European Central Bank (on Thursday) looking set in stone, the focus will be on what Fed Chair Jerome Powell and ECB President Christine Lagarde say about the rate outlook.

If markets are right, this should be the last hike from the Fed and second-to-last from the ECB, as investors look ahead to the end of the great synchronised global tightening campaign - and rate cuts that may soon follow. The U.S. earnings season will also move into higher gear this week with Meta Platforms, Microsoft and Alphabet among the big names reporting.

Their results will have to be good enough to justify the S&P 500's earning multiple of 20 times and its gains of 19% year-to-date. In Asia, contrary to what some investors were expecting, the Bank of Japan，which meets on Friday，is leaning towards keeping its yield control policy unchanged so that policymakers can scrutinise more data to ensure wages and inflation keep rising, sources told Reuters.

That report sent the yen to a two-week low of 141.95 per dollar on Friday but the currency regained some composure in Asia as the new week began, steadying at 141.36 per dollar. Manufacturing activity in Japan extended declines in July while growth in the service sector slowed, surveys showed on Monday, a sign that global demand remains week and is weighing on Japanese businesses.

For those looking for major stimulus from China's politburo meeting, which is expected to come on Friday, they risk disappointment again after months of anticipation. Piecemeal support measures from the government's various agencies in recent days to prop up the property sector and consumption have failed to impress. Beijing likes to do things on its own time and, after all, growth is still tracking in line with the government's economic target for the year of about 5%, although some big global banks have only recently cut their forecasts to come in line with that.