(Bloomberg) — Asian shares climbed while the dollar weakened Monday on expectations of a Federal Reserve rate cut this year, with US inflation data due this week likely indicating easing price pressure.
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The MSCI Asia Pacific index posted its biggest gain since May 16, led by stock gauges in Hong Kong, China, and Japan. US and European equity futures were little changed. The euro, the pound and the yen rose slightly versus the greenback.
Global investors are hopeful that the Fed, along with the European Central Bank and its peers, will cut interest rates this year. This, along with strong company earnings and signals from US officials that further rate hikes are unlikely, has boosted investor sentiment.
“Markets continue to consolidate while global investors remain discerning on signs of US economic health and Fed’s plausible monetary path,” said Edward Ng, senior portfolio manager at Nikko Asset Management Asia Ltd. “Investors will look to US PCE print this Friday as a potential signpost for further market directions.”
A swath of inflation prints from Australia to Japan, the Eurozone and the US is due this week as traders finesse bets on the outlook for monetary policy. The Fed’s favorite measure of underlying inflation is due on Friday and is expected to show modest relief.
The ECB is widely expected to cut rates for the first time since concluding an unprecedented tightening campaign at its June meeting. But US officials are moving toward a pivot at a slower pace, with Fed Chair Jerome Powell stressing the need for more evidence that inflation is on a sustained path to their 2% goal before cutting the policy benchmark.
European Central Bank Chief Economist Philip Lane is due to speak about inflation in Dublin on Monday. John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among the US central bankers due to speak this week.
“Risk sentiment is upbeat after softer inflation expectations” thanks to US data, said Charu Chanana of Saxo Capital Markets.
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Trading of cash Treasuries was closed. British and US markets are closed Monday for holidays. That means the “T+1” rule that has the potential to cause trouble for overseas investors will come into effect when traders come back from the long weekend — making US equities settle in one day rather than two.
Helping to lift sentiment, profits at China’s industrial companies rose in April, data showed on Monday, as a government push for equipment upgrade lifted demand and exports returned to growth. A global cyclical boom in technology products like chips as well as a push by the Chinese government to get firms to replace their old equipment likely supported the upturn.
Meanwhile, gold rose. This year has witnessed a rolling series of commodity price spikes thanks to supply constraints, surging demand and even some speculative activity.
Oil moved higher after its biggest weekly loss in four, with the focus on the Organization of Petroleum Exporting Countries and its partners, who are set to gather online on June 2 to discuss supply cuts.
Some key events this week:
ECB’s Philip Lane speaks in Dublin on inflation, Monday
IMF holds discussions with Ukrainian authorities to review economic policies as the country seeks to unlock next tranche of $2.2 billion in aid, Monday
Cleveland Fed President Loretta Mester speaks at BOJ event in Tokyo; Minneapolis Fed President Neel Kashkari and ECB Governing Council member Klaas Knot address Barclays-CEPR International Monetary Policy forum, Tuesday
South African election, the most significant since the end of apartheid, Wednesday
Fed releases Beige Book economic survey, Wednesday
South Africa rate decision, US initial jobless claims, GDP, wholesale inventories, Thursday
New York Fed President John Williams speaks at the Economic Club of New York, Thursday
GDP data published for Canada, Eurozone, Turkey, Friday
Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 6:48 a.m. London time
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.7%
The MSCI Emerging Markets Index rose 0.5%
S&P 500 futures were little changed
Nikkei 225 futures (OSE) rose 0.6%
Japan’s Topix rose 0.7%
Australia’s S&P/ASX 200 rose 0.8%
Hong Kong’s Hang Seng rose 0.7%
The Shanghai Composite rose 0.6%
Euro Stoxx 50 futures were little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0849
The Japanese yen rose 0.1% to 156.77 per dollar
The offshore yuan was little changed at 7.2584 per dollar
The British pound was little changed at $1.2741
Cryptocurrencies
Bitcoin fell 0.2% to $68,564.37
Ether rose 1.3% to $3,909.13
Bonds
The yield on 10-year Treasuries declined one basis point to 4.46%
Germany’s 10-year yield declined one basis point to 2.58%
Britain’s 10-year yield was little changed at 4.26%
Australia’s 10-year yield declined four basis points to 4.27%
Commodities
Spot gold rose 0.4% to $2,342.87 an ounce
West Texas Intermediate crude rose 0.3% to $77.96 a barrel
Spot gold rose 0.4% to $2,342.86 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess.
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