Asian Stocks to Climb as Risk Sentiment Rebounds: Markets Wrap

(Bloomberg) — Asian stocks are set to follow their US peers higher after American consumers tempered inflation expectations, bolstering sentiment the Federal Reserve may have room to cut rates this year.

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Equity futures in Australia, Japan and Hong Kong all point to early gains on Monday while Chinese contracts slipped. US futures were steady after the S&P 500 rose 0.7% on Friday to snap a two-day drop.

The moves suggest renewed optimism after a gauge of Asian stocks suffered their worst week in more than a month, as concerns over whether the Fed will cut this year mounted along with doubts over the implementation and effectiveness of a property rescue package in China.

“Given the rebound in US markets, you’ll see Asian bourses open reasonably well,” said Tony Sycamore, an analyst at IG Markets in Sydney. “Risk sentiment looks reasonably good today.”

Traders will closely watch a speech from Bank of Japan Governor Kazuo Ueda Monday for clues on the outlook for the central bank’s policy as markets price a chance of another rate hike this year. The yen fluctuated around 157 per dollar on Friday as Japan’s top currency official reiterated his stance to take steps against excessive moves.

Still, Wall Street got a degree of relief as University of Michigan data showed consumers expect prices to climb at a 3.3% annual rate over the next year, down from the 3.5% expected earlier in the month. Treasuries barely budged after Fed Governor Christopher Waller said he still thinks the neutral interest-rate is relatively low, while warning that unsustainable fiscal spending could alter that trend.

In a session of low volume ahead of the Memorial Day long weekend, the S&P 500 rebounded from a two-day slide while The Nasdaq 100 hit a fresh all-time high, led by gains in Nvidia Corp. Crypto stocks climbed as the Securities and Exchange Commission paved the way for the eventual launch of the first US exchange-traded funds investing directly in Ether.

The dollar edged lower in Asia on Monday while the trading of cash Treasuries was closed. With US markets closed Monday, the “T+1” rule will come into effect when traders come back from the holiday weekend — making US equities settle in one day rather than two.

Read More: About the ‘T+1’ Rule Making US Stocks Settle in a Day: QuickTake

Elsewhere this week, investors will pay close attention to China industrial profits and PMI data to help gauge the health of the world’s second largest economy. A swath of inflation prints from Australia to Japan and the Eurozone are also due as traders finesse bets on the outlook for monetary policy.

“A firmer Eurozone reading will not deter expectations for rate cut on June 6,” said Marc Chandler, chief market strategist at Bannockburn Global. “Nor will a higher Tokyo print impact expectations for the BOJ.”

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