Asian shares rise as traders prepare for US inflation data
Investors brace for a busy run of inflation data that could set the scene for a European rate cut as soon as next week
27 May 2024 - 07:47
byWayne Cole
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.
A man walks past an electronic screen outside a brokerage in Tokyo, Japan March 21, 2024. File photo: REUTERS
Sydney — Asian shares firmed on Monday as investors braced for a busy run of inflation data that could set the scene for a European rate cut as soon as next week and a US policy easing within just a few months.
Holidays in Britain and the US made for thin trading ahead of Friday’s figures on core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation.
Median forecasts are for a rise of 0.3% in April, keeping the annual pace at 2.8%, with risks on the downside.
“Consumer and producer price data suggest core PCE inflation lost further momentum in April after a strong start to the year,” analysts at TD Securities said in a note.
“Indeed, we look for the core index to advance 0.22% month on month versus 0.32% in March and an initial 0.25% estimate,” they added.
“We also look for the headline to rise 0.23% month on month while the super core likely cooled to 0.26%.”
Figures for inflation in the eurozone are also due on Friday and an expected tick up to 2.5% should not stop the European Central Bank (ECB) from easing policy next week.
Policymakers Piero Cipollone and Fabio Panetta both flagged a coming cut at the weekend, while markets imply an 88% chance of an easing to 3.75% on June 6.
The ECB chief economist told the Financial Times newspaper that the central bank was ready to start cutting, but policy would still need to be restrictive in 2024.
The Bank of Canada might also ease next week, while the Fed is seen waiting until September for its first move.
At least eight Fed officials are due to speak this week, including two appearances by the influential head of the New York Fed John Williams.
The head of the Bank of Japan (BOJ) said on Monday it would proceed cautiously with inflation-targeting frameworks, adding that some challenges were “uniquely difficult” for Japan after years of ultra-easy monetary policy.
The BOJ holds its policy meeting on June 14 and there is some chance it may buck the global trend and hike rates again, albeit to a modest 0.15%.
Tech bulls
The prospect of lower borrowing costs across much of the globe has been positive for equities and commodities, though many markets did run into profit-taking last week.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6%, having slipped 1.5% last week and away from a two-year peak.
Taiwan stocks reached a record, having climbed more than 7% for the month so far on a tide of tech bullishness. Japan’s Nikkei rose 0.5%, ahead of a reading on Tokyo consumer prices later in the week.
Chinese blue chips firmed 0.4%, with the major release this week being surveys of manufacturing and services for May on Friday.
Eurostoxx 50 futures eased 0.1%, while trade in FTSE futures was closed.
S&P 500 futures dipped 0.1%, as did Nasdaq futures. The Nasdaq hit record highs last week after Nvidia beat expectations.
Indeed, Nvidia alone has accounted for a quarter of the S&P 500’s gains in 2024, while the “Magnificent Seven” tech darlings are up 24% for the year.
In currency markets, attention was again centred on the yen and the risk of Japanese intervention ahead of the ¥160.00 level. The dollar stood at ¥156.78, having added 0.9% last week and close to its recent top of ¥160.245. Japan renewed its push to counter excessive yen falls during a weekend gathering of Group of Seven (G7) finance leaders, after a recent rise in bond yields to a 12-year high failed to slow the currency’s decline.
The euro was steady at $1.0847, and short of its recent top at $1.0895.
Gold was holding at $2,342/oz, having recoiled 3.4% last week and off a record peak of $2,449.89.
Oil prices were stuck near four-month lows amid concerns about demand as the US driving season gets under way this week. Investors are waiting to see if Opec+ will debate new output cuts at an online meeting on June 2, though analysts doubt there will be a consensus for a move.
Brent was up 20c at $82.32 a barrel, while US crude rose 27c to $77.99 a barrel.
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 rise as traders prepare for US inflation data
Investors brace for a busy run of inflation data that could set the scene for a European rate cut as soon as next week
Sydney — Asian shares firmed on Monday as investors braced for a busy run of inflation data that could set the scene for a European rate cut as soon as next week and a US policy easing within just a few months.
Holidays in Britain and the US made for thin trading ahead of Friday’s figures on core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation.
Median forecasts are for a rise of 0.3% in April, keeping the annual pace at 2.8%, with risks on the downside.
“Consumer and producer price data suggest core PCE inflation lost further momentum in April after a strong start to the year,” analysts at TD Securities said in a note.
“Indeed, we look for the core index to advance 0.22% month on month versus 0.32% in March and an initial 0.25% estimate,” they added.
“We also look for the headline to rise 0.23% month on month while the super core likely cooled to 0.26%.”
Figures for inflation in the eurozone are also due on Friday and an expected tick up to 2.5% should not stop the European Central Bank (ECB) from easing policy next week.
Policymakers Piero Cipollone and Fabio Panetta both flagged a coming cut at the weekend, while markets imply an 88% chance of an easing to 3.75% on June 6.
The ECB chief economist told the Financial Times newspaper that the central bank was ready to start cutting, but policy would still need to be restrictive in 2024.
The Bank of Canada might also ease next week, while the Fed is seen waiting until September for its first move.
At least eight Fed officials are due to speak this week, including two appearances by the influential head of the New York Fed John Williams.
The head of the Bank of Japan (BOJ) said on Monday it would proceed cautiously with inflation-targeting frameworks, adding that some challenges were “uniquely difficult” for Japan after years of ultra-easy monetary policy.
The BOJ holds its policy meeting on June 14 and there is some chance it may buck the global trend and hike rates again, albeit to a modest 0.15%.
Tech bulls
The prospect of lower borrowing costs across much of the globe has been positive for equities and commodities, though many markets did run into profit-taking last week.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6%, having slipped 1.5% last week and away from a two-year peak.
Taiwan stocks reached a record, having climbed more than 7% for the month so far on a tide of tech bullishness. Japan’s Nikkei rose 0.5%, ahead of a reading on Tokyo consumer prices later in the week.
Chinese blue chips firmed 0.4%, with the major release this week being surveys of manufacturing and services for May on Friday.
Eurostoxx 50 futures eased 0.1%, while trade in FTSE futures was closed.
S&P 500 futures dipped 0.1%, as did Nasdaq futures. The Nasdaq hit record highs last week after Nvidia beat expectations.
Indeed, Nvidia alone has accounted for a quarter of the S&P 500’s gains in 2024, while the “Magnificent Seven” tech darlings are up 24% for the year.
In currency markets, attention was again centred on the yen and the risk of Japanese intervention ahead of the ¥160.00 level. The dollar stood at ¥156.78, having added 0.9% last week and close to its recent top of ¥160.245. Japan renewed its push to counter excessive yen falls during a weekend gathering of Group of Seven (G7) finance leaders, after a recent rise in bond yields to a 12-year high failed to slow the currency’s decline.
The euro was steady at $1.0847, and short of its recent top at $1.0895.
Gold was holding at $2,342/oz, having recoiled 3.4% last week and off a record peak of $2,449.89.
Oil prices were stuck near four-month lows amid concerns about demand as the US driving season gets under way this week. Investors are waiting to see if Opec+ will debate new output cuts at an online meeting on June 2, though analysts doubt there will be a consensus for a move.
Brent was up 20c at $82.32 a barrel, while US crude rose 27c to $77.99 a barrel.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.