Marketmind: Brittle markets brace for China trade blues

investing.com:

By Jamie McGeever

(Reuters) — A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.

Asian markets are set to open on the defensive on Thursday, with investors anticipating another slump in Chinese trade activity against a backdrop of rising U.S. bonds yields, new 2023 highs in oil prices and a steep selloff on Wall Street.

Malaysia's central bank is expected to keep interest rates on hold at 3.00% for a second meeting, Chinese FX reserves data and Australian trade figures are also due, and G20 finance and energy ministers meet in India ahead of the leaders' summit this weekend.

The general market mood is souring as September unfolds, the latest catalyst being a surprisingly strong reading of U.S. services sector activity and price pressure that put a possible Fed rate hike later this year back on the table.

Oil's rise to new highs for the year continue to unnerve investors. For the first time this year U.S. crude futures are more expensive than they were 12 months ago, meaning the disinflationary impulse has now reversed.

Good news for oil exporters, not so good for oil importers like Japan, which imports almost all its energy. The yen is extremely weak, and senior Japanese officials are warning that all options to support the currency are on the table.

Elsewhere in Asian FX markets, China's yuan slid to a 10-month low on Wednesday through 7.32 per dollar and is a whisker from plumbing depths not recorded since late 2007.

Investors could get further reminders on the currency's vulnerability from Chinese trade and FX reserves figures on Thursday.

Chinese trade has been one of the biggest economic red flags this year. Exports and imports have both plunged, reflecting weak overseas