By Jamie McGeever

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

Asian markets could lose steam on Thursday following a sluggish performance on Wall Street on Wednesday, as the effects of China’s largest economic and market stimulus package since the pandemic begin to fade.

Higher U.S. bond yields and the dollar’s biggest rise in a month are likely to limit investors’ risk appetite. This combination has pushed the Japanese yen to a three-week low near 145.00 per dollar.

The global growth and policy outlook remains unclear, giving investors reason for caution. Weak U.S. consumer confidence has revived doubts about a “soft landing” while the euro zone’s growth and inflation outlook appears to be deteriorating.

HSBC economists revised their European Central Bank forecasts, now expecting a 25 basis point rate cut at every meeting from October to April 2025, reducing the benchmark deposit rate to 2.25%.

The euro zone’s weakness is concerning for China, given their strong trade and financial relations. Chinese stocks rose 1.5% on Wednesday to a two-month high but closed near the day’s lows.

Hong Kong stocks are doing well; the Hang Seng is up 15% in two weeks, and the MSCI Asia ex-Japan index has reached its highest since February 2022. However, they may be due for a pause.

The euro’s decline and spike in U.S. bond yields helped the dollar regain some ground, rising 0.4% for its biggest daily gain in a month after flirting with a new 14-month low.

The dollar struggled against emerging market currencies, most notably the Chinese yuan, which continued its rally, rising for the sixth consecutive day against the dollar. The offshore yuan traded below 7.00 per dollar for the first time since January last year.

Since global market volatility on August 5, China’s yuan has appreciated more than 3% against the dollar, a notable achievement given Beijing’s tight management of the exchange rate.

Asian economic indicators to watch on Thursday include manufacturing data from Thailand, industrial production figures from Singapore, and Hong Kong’s latest trade snapshot.

On the policy side, the Bank of Japan will release the minutes from its July 30-31 meeting, and the Reserve Bank of Australia will publish its Financial Stability Review.

Key developments that could guide Asian markets on Thursday:

• BOJ minutes from July 30-31 policy meeting
• Singapore industrial production (August)
• Hong Kong trade (August)