Equities rise on renewed confidence of US interest rate cuts, while a weaker yen and a small dip in the Australian dollar keeps the greenback steady
07 May 2024 - 07:22
byTom Westbrook
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Singapore — Asian shares made 15-month highs on Tuesday on renewed confidence of US interest rate cuts, while a weaker yen and a small dip in the Australian dollar kept the dollar steady.
Australia’s central bank left interest rates on hold, as expected, but the Aussie dollar slipped about 0.4% and the Australian stock market rose as policymakers did not strengthen guidance around the risk of another rate hike.
In Hong Kong the Hang Seng was set to snap a 10-day winning streak with a 0.9% loss, though markets in Taiwan and South Korea were all higher.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3%. Japan’s Nikkei rose 1.3%.
FTSE futures were up 1% pointing to a positive return from a market holiday. European futures rose 0.3% and S&P 500 futures were flat.
The mood was underpinned by last week’s softer-than-expected US jobs data and remarks from Federal Reserve chair Jerome Powell reiterating that the next move in rates will be lower.
“[Powell] said that he is confident policy is restrictive and that if progress on inflation stalled, the [Fed] would hold off on cutting, implying a high bar to hiking,” said Goldman Sachs economist David Mericle.
He also said, in a note to clients, that the US hiring rate and other measures of employment growth intentions were soft and the weakest part of labour market data.
Treasuries, which rallied on Friday’s jobs figures, traded steady in New York overnight and 10-year yields held at 4.49% in Tokyo on Tuesday. Interest rates markets price at least one US rate cut in 2024, in November.
Demand will be tested at a $58bn three-year note auction on Tuesday, which is followed by $42bn in 10-year sales on Wednesday and $25bn of 30-year sales on Thursday.
Aussie slips
The expectation of falling rates has weighed on the dollar, though only gently. European policymakers are readying cuts for June, capping the euro, and rates are not expected to move too far above zero in Japan in 2024, leaving a wide gap with the rest of the world.
The dollar rose 0.6% on the yen on Monday and a further 0.5% to ¥154.60 on Tuesday, keeping markets on edge as to whether Japanese authorities may step in again.
Traders estimate Japan spent almost $60bn defending the yen last week.
The Australian dollar slipped 0.4% to $0.6601 as the central bank stuck to “not ruling anything in or out” rather than explicitly spelling out rate hike risks in response to inflation proving stickier than its economists had forecast.
Sterling, at $1.2552, and the euro at $1.0765, slipped marginally.
In commodity trade, oil was a tad firmer, with Brent crude futures up 0.3% to $83.58 a barrel with a ceasefire deal in the Middle East proving elusive. Gold rose overnight and was steady at $2,325/oz on Tuesday.
Wheat, corn and soybean traded around multi-month highs on worries about unfavourable weather in Russia — where it has been frosty and dry — and Brazil, where there are floods.
Iron ore futures have rallied on clues that China’s Politburo is planning more support measures for the beleaguered property sector. Benchmark June iron ore on the Singapore Exchange has risen almost 25% in a month.
German factory orders are the highlight of the European calendar on Tuesday. UBS and Disney report earnings.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Asian shares climb to 15-month highs
Equities rise on renewed confidence of US interest rate cuts, while a weaker yen and a small dip in the Australian dollar keeps the greenback steady
Singapore — Asian shares made 15-month highs on Tuesday on renewed confidence of US interest rate cuts, while a weaker yen and a small dip in the Australian dollar kept the dollar steady.
Australia’s central bank left interest rates on hold, as expected, but the Aussie dollar slipped about 0.4% and the Australian stock market rose as policymakers did not strengthen guidance around the risk of another rate hike.
In Hong Kong the Hang Seng was set to snap a 10-day winning streak with a 0.9% loss, though markets in Taiwan and South Korea were all higher.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3%. Japan’s Nikkei rose 1.3%.
FTSE futures were up 1% pointing to a positive return from a market holiday. European futures rose 0.3% and S&P 500 futures were flat.
The mood was underpinned by last week’s softer-than-expected US jobs data and remarks from Federal Reserve chair Jerome Powell reiterating that the next move in rates will be lower.
“[Powell] said that he is confident policy is restrictive and that if progress on inflation stalled, the [Fed] would hold off on cutting, implying a high bar to hiking,” said Goldman Sachs economist David Mericle.
He also said, in a note to clients, that the US hiring rate and other measures of employment growth intentions were soft and the weakest part of labour market data.
Treasuries, which rallied on Friday’s jobs figures, traded steady in New York overnight and 10-year yields held at 4.49% in Tokyo on Tuesday. Interest rates markets price at least one US rate cut in 2024, in November.
Demand will be tested at a $58bn three-year note auction on Tuesday, which is followed by $42bn in 10-year sales on Wednesday and $25bn of 30-year sales on Thursday.
Aussie slips
The expectation of falling rates has weighed on the dollar, though only gently. European policymakers are readying cuts for June, capping the euro, and rates are not expected to move too far above zero in Japan in 2024, leaving a wide gap with the rest of the world.
The dollar rose 0.6% on the yen on Monday and a further 0.5% to ¥154.60 on Tuesday, keeping markets on edge as to whether Japanese authorities may step in again.
Traders estimate Japan spent almost $60bn defending the yen last week.
The Australian dollar slipped 0.4% to $0.6601 as the central bank stuck to “not ruling anything in or out” rather than explicitly spelling out rate hike risks in response to inflation proving stickier than its economists had forecast.
Sterling, at $1.2552, and the euro at $1.0765, slipped marginally.
In commodity trade, oil was a tad firmer, with Brent crude futures up 0.3% to $83.58 a barrel with a ceasefire deal in the Middle East proving elusive. Gold rose overnight and was steady at $2,325/oz on Tuesday.
Wheat, corn and soybean traded around multi-month highs on worries about unfavourable weather in Russia — where it has been frosty and dry — and Brazil, where there are floods.
Iron ore futures have rallied on clues that China’s Politburo is planning more support measures for the beleaguered property sector. Benchmark June iron ore on the Singapore Exchange has risen almost 25% in a month.
German factory orders are the highlight of the European calendar on Tuesday. UBS and Disney report earnings.
Reuters
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