(Bloomberg) — Asian stocks climbed, tracking a rally in US markets after an inflation reading eased concerns of a more hawkish Federal Reserve.
Equities in Australia and South Korea rose at the open, while the Japanese stock market is shut for a holiday. US contracts nudged higher after the S&P 500 rose 1% on Friday. Yen traders remain alert to efforts to support the currency that’s at its weakest in more than three decades. Australian bond yields fell, following US Treasuries on Friday.
Chinese shares will be closely watched after industrial companies’ profits slumped in March as exports flagged and deflationary pressures persisted.
The weakness in the latest data “casts doubts on whether the economic recovery seen early this year can be sustained,” Commerzbank strategists including Charlie Lay wrote in a note to clients. “It is important now that the government will follow through with their fiscal stimulus plan outlined in the National People’s Congress annual meeting back in March.”
Asian technology stocks may move in early trading after earnings from Microsoft Corp. and Google’s parent Alphabet Inc. last week sent a clear message that spending on artificial intelligence and cloud computing is paying off. The rally in tech shares has helped trim the drop in global stocks this month to 2.7%, the first monthly loss since October, amid concerns over lingering inflation pressures and conflict in the Middle East.
While the correction could be over, “there is a significant risk that it’s just a bounce from oversold conditions,” said Shane Oliver, chief economist and head of investment strategy at AMP Ltd. Still, any further selloff is unlikely to be deep and stocks will see more gains “as disinflation resumes, central banks ultimately cut interest rates and recession is avoided or proves mild,” he wrote in a note to clients.
Traders will also be focusing on the Fed’s policy meeting on Wednesday after the central bank’s preferred measure of inflation rose at a brisk pace in March, though roughly in line with estimates. With officials likely to hold rates steady at a more than two-decade high, much of the focus will be on any pivot in the tone of the post-meeting statement and Chair Jerome Powell’s press conference.
“With all measures of US consumer prices showing a steep acceleration over the past three to four months, the FOMC is bound to row back hard from its earlier predictions of meaningful policy easing this year,” Societe Generale economists including Klaus Baader wrote in a note to clients. “That said, markets have already scaled back pricing of rate cuts drastically, so unless Chair Powell plays up the possibility of rate hikes, the market damage is likely to be modest.”
A gauge of US Treasury returns has slumped 2.3% this month, set for the biggest monthly drop since February last year, as hawkish Fedspeak and strong economic data pushed back rate-cut bets. Swaps traders now see only one Fed reduction for all of 2024, well below the roughly six quarter-point cuts they expected at the start of 2024.
Read More: Fed Rate-Cut Debate Shifts From When Toward If on Inflation Data
Oil fell and gold edged lower in early Asian trading as US Secretary of State Antony Blinken steps up efforts to secure a truce in Gaza in meetings in the Middle East on Monday, in what could be a final chance to persuade Israel to call off an attack on Rafah.
Elsewhere this week, European inflation readings are due while Amazon.com Inc. and Apple Inc. report earnings. The US Treasury is also set to keep its sales of long-term debt steady in a new plan this week.
Some key events this week:
- All four Chinese megabanks report first-quarter earnings, Monday
- Germany CPI, Monday
- Eurozone economic confidence, consumer confidence, Monday
- Australia retail sales, Tuesday
- China Caixin manufacturing PMI, non-manufacturing PMI, manufacturing PMI, Tuesday
- Japan unemployment, industrial production, retail sales, Tuesday
- Eurozone CPI, GDP, Tuesday
- Colombia rate decision, Tuesday
- Amazon earnings, Tuesday
- New Zealand unemployment, Wednesday
- UK S&P Global / CIPS Manufacturing PMI, Wednesday
- US rate decision, Wednesday
- Indonesia CPI, Thursday
- South Korea CPI, S&P Global Manufacturing PMI, Thursday
- Eurozone S&P Global Manufacturing PMI, Thursday
- Apple earnings, Thursday
- Eurozone unemployment, Friday
- Norway rate decision, Friday
- US unemployment, nonfarm payrolls, ISM Services, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 9:09 a.m. Tokyo time
- Hang Seng futures fell 0.3%
- Australia’s S&P/ASX 200 rose 0.5%
- Kospi rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0709
- The Japanese yen rose 0.1% to 158.13 per dollar
- The offshore yuan was little changed at 7.2642 per dollar
- The Australian dollar rose 0.1% to $0.6541
Bonds
- Australia’s 10-year yield declined six basis points to 4.46%
Cryptocurrencies
- Bitcoin fell 0.7% to $63,219.64
- Ether fell 1.1% to $3,274.51
Commodities
- West Texas Intermediate crude fell 0.7% to $83.30 a barrel
- Spot gold fell 0.1% to $2,335.18 an ounce
This story was produced with the assistance of Bloomberg Automation.
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