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Asian stocks rise after S&P 500 climbs to record: markets wrap

Asian stocks rise after S&P 500 climbs to record: markets wrap
Donald Trump speaks at a campaign rally in Atkinson, New Hampshire on 16 January 2023. He is the frontrunner in the US presidential race.

Most Asian equities rose after the S&P 500 Index climbed to a record on Friday, bolstered by speculation the Federal Reserve will start cutting interest rates this year.

Shares gained in Japan and Taiwan, while those in Hong Kong and China were mixed. US stock futures extended gains in Asia after another rally in the S&P 500’s most-influential group — technology — drove the gauge to a fresh high on Friday for the first time in two years.

Japan’s Nikkei 225 Stock Average has risen more than 8% this year, leading gains in major developed markets. The Bank of Japan starts a two-day policy meeting on Monday, and it is overwhelmingly forecast to leave its settings unchanged on Tuesday when it announces the results of its gathering. 

China’s commercial lenders kept their benchmark lending rates unchanged on Monday, in line with the central bank’s decision to maintain policy rates amid concerns over pressures on the yuan. 

“While the US S&P 500 and Nasdaq 100 set new record highs ahead of the weekend, it is Japan’s stock market that is off to a dramatic start of the year,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “Although the market anticipates the beginning of an aggressive easing cycle by several central banks, and an exit of the BOJ’s negative-interest-rate policy, the start is not expected until later in the first half.”

Oil slipped as OPEC member Libya restarted production from its largest field, outweighing concern about tensions in the Red Sea and the Middle East. The US continues attempts to prevent Iran-backed Houthi rebels in Yemen from attacking vessels in the Red Sea, but such military action will take time, according to a Biden administration official.

The dollar weakened against all its G10 peers, paring the gains made this month amid speculation the Fed’s policies would engineer a soft landing for the US economy. 

Treasury 10-year notes were little changed. That was after the yield declined Friday for the first time in a week as a “Fed-friendly” survey from the University of Michigan showed a mix of high consumer confidence and lower inflation expectations. 

An exuberant melt-up phase in US stocks might already be underway and might become irrational, according to Ed Yardeni. “Unless Fed chair Powell stresses that he’s in no rush to ease, a speculative bubble could inflate, funded by money moving from interest-paying vehicles into stocks and bonds,” he wrote in a note.

Investors will also be looking to Thursday’s first estimate of US fourth-quarter GDP, central bank meetings for Canada and Europe, along with South Korean economic output data and European initial readings of purchasing managers’ surveys of 2024.

Ron DeSantis dropped out of the US presidential race to endorse Republican front-runner Donald Trump ahead of the New Hampshire primary on Tuesday.

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