Stocks Rise, Dollar Slips Ahead of Inflation Data: Markets Wrap

(Bloomberg) — China-related equities were poised for further gains on Tuesday, while other Asian stocks look muted ahead of a swath of global inflation prints expected to influence monetary policy.

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Equity futures point to Hong Kong’s benchmark gaining more than 1% and Shanghai stocks also rising. Japan and Australian bourses are set to open more quietly, following a start to the week when US and UK markets were closed and European shares edged higher in thin trading. US futures rose in early Asia hours.

Shares of China’s major chip stocks jumped on Monday after Beijing announced a massive semiconductor investment fund to propel the domestic industry, the latest effort toward self-sufficiency as the US seeks to restrict its growth. Semiconductor Manufacturing International Corp., the largest chipmaker in China, rose as much as 8.1% in Hong Kong, while Hua Hong Semiconductor Ltd., a smaller competitor, climbed more than 10%.

The MSCI Asia Pacific index posted its biggest gain since May 16 on Monday, led by stock gauges in Hong Kong, China and Japan.

Traders will this week be studying fresh inflation data from Australia to Japan, the euro region and the US. Bank of Japan Governor Kazuo Ueda and his deputy indicated there is scope for gradually raising interest rates now that the nation has shifted away from an inflation norm of 0%.

The Federal Reserve’s favorite measure of underlying inflation is expected to show modest relief when it lands on Friday. Chair Jerome Powell has stressed the need for more evidence that inflation is on a path to the 2% goal before easing policy. John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among US central bankers due to speak this week.

With US and UK markets closed Monday, European stocks hogged the spotlight, with carmakers and utilities leading a modest advance in the Stoxx Europe 600 index. Turnover was less than half the 20-day average for the time of day. American equity futures advanced and a gauge of the dollar dipped.

The ECB shouldn’t rule out lowering borrowing costs at both its June and July meetings, Governing Council member Francois Villeroy de Galhau said, pushing back against fellow monetary officials uncomfortable with the idea of consecutive cuts. Chief Economist Philip Lane told the Financial Times the central bank will have to keep policy restrictive through 2024, even with the prospect of an interest-rate cut next month.

While an ECB rate cut in June has been widely telegraphed, subsequent steps are less clear given uncertainty over wage growth and factors like the fighting in the Middle East. Data this week may show headline inflation in the euro region ticked up in May.

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

Trading of cash Treasuries was closed. The “T+1” rule that has the potential to cause trouble for overseas investors will come into effect when traders return from the long weekend — making US equities settle in one day rather than two.

Meanwhile, gold gained, while copper futures fell. Oil advanced after its biggest weekly loss in four, with the focus on an OPEC+ supply meeting on Sunday and US demand at the start of the summer driving season.

Some key events this week:

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