Global equities take their lead from Nikkei

London/Sydney — World shares tipped higher on Monday as a mixed European open could not dispel enthusiasm over record heights reached by Japan’s Nikkei and as investors braced for a week packed with central bank events and major data that could refine market wagers.

Federal Reserve chair Jerome Powell testifies before legislators on Wednesday and Thursday, though analysts assume he will stay in wait-and-see mode on policy given recent upside surprises on inflation that have helped temper market rate cut bets.

The February payrolls report on Friday could also shift the calculus with forecasts favouring a still-solid rise of 200,000 after January's barnstorming 353,000 jump.

“We are still in an environment of economic improvement. Friday’s US employment data will tell us a lot about where we are in terms of wage inflation and consumer resilience,” said Lilian Chovin, head of asset allocation at the British private bank, Coutts.

“It will also inform on whether the current narrative is sustainable.”

In Europe, a UK budget on Wednesday is followed by the European Central Bank’s (ECB) latest policy meeting on Thursday. The ECB is considered certain to keep rates at 4.0%, but also lower its outlook for inflation in a nod to eventual cuts.

Europe’s broadest index of stocks and the German DAX steadied while the French and UK markets slipped 0.2% and 0.3%, respectively, by 9.05am GMT.

Other events of note this week include US President Joe Biden’s state of the union address on Thursday, the Super Tuesday US primaries and China’s National People’s Congress (NPC) meeting starting on Tuesday which might flag new stimulus measures.

Chinese blue chips were largely flat awaiting some concrete news on any measures.

The Bank of Canada also meets this week and the expectation is it stays on hold, with a first cut in June or later.

Nikkei heads north

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7%, after snapping a five-week winning streak with a slight drop last week.

Japan’s Nikkei climbed 0.5% to break 40,000 for the first time, having risen for five consecutive weeks. Tech darling Tokyo Electron has surged more than 50% since the start of the year.

An upbeat report on fourth quarter capex out Monday suggested GDP could be revised to positive from negative, meaning Japan was not in recession after all. That added to speculation that a strong wage round could lead the Bank of Japan (BOJ) to end negative rates in April.

S&P 500 futures and Nasdaq futures were trading near flat, having made record closing highs on Friday on upbeat earnings and enthusiasm for all things artificial intelligence (AI).

BofA analyst Savita Subramanian now sees the S&P 500 pushing on to 5,400, thanks to solid earnings, though there is a risk of a correction given how far the market has come.

“The era of lower quality growth where cheap capital and globalisation contributed to margins is over,” said Subramanian. “Now it’s time for sustainable efficiency and productivity gains supported by automation and AI.”

In currency markets, the dollar steadied after some soft US economic data, while the yen firmed ahead of Tokyo consumer price data on Tuesday that is expected to show inflation sprang higher in February.

The dollar stood at ¥150.40, creeping towards last week’s peak of ¥150.85. The euro lay flat at $1.0845 after bouncing from a low of $1.0796 last week.

Bitcoin, meanwhile scaled a two-year high, breaking $64,000 as a wave of money carried it within striking distance of record levels.

The US data surprise had helped gold to a two-month top and the metal was last trading steady at $2,083/oz.

Oil prices firmed after Opec+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2-million barrels a day into the second quarter.

Brent rose 42c to $83.97 a barrel, while US crude gained 34c to $80.31 a barrel.

Reuters