Business Maverick

Business Maverick

Asian stocks climb as risk sentiment rebounds: markets wrap

Asian stocks climb as risk sentiment rebounds: markets wrap
Residential buildings in the Kangcheng neighbourhood of Shanghai, China, on Monday, 1 August 2022. (Photo: Qilai Shen/Bloomberg)

Asian stocks tracked gains in their US peers as an easing in US consumer inflation expectations bolstered the case for the Federal Reserve to cut rates this year.

Markets in Hong Kong, China, Australia, South Korea and Japan advanced on Monday. US equity futures were little changed. 

The renewed optimism comes after a gauge of Asian stocks suffered their worst week in more than a month. The losses were fuelled by doubts over whether the Fed will cut rates this year along with concerns over the implementation and effectiveness of a property rescue package in China. 

In Japan, the yen traded slightly stronger against the dollar as Bank of Japan Governor Kazuo Ueda said on Monday the central bank will move cautiously to anchor inflation expectations at 2%. The yen fluctuated around 157 per greenback, as markets priced in a chance of another rate hike by the BOJ this year.

Wall Street got a degree of relief as University of Michigan data showed consumers expect prices to climb at a 3.3% annual rate over the next year, down from the 3.5% expected earlier in the month. Later this week, the Federal Reserve’s first-line inflation gauge — due on Friday — is set to show some modest relief from stubborn price pressures. 

Federal Reserve chair Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustained path to their 2% goal before cutting the benchmark interest rate, which has been at a two-decade high since July.

The dollar edged lower in Asia on Monday while the trading of cash Treasuries was closed. With US markets closed on Monday for the Memorial Day holiday, the “T+1” rule will come into effect when traders come back from the long weekend — making US equities settle in one day rather than two. 

Among the US central bankers speaking during the holiday-shortened week are John Williams, Lisa Cook, Neel Kashkari and Lorie Logan.

Elsewhere this week, investors will pay close attention to China industrial profits and PMI data to help gauge the health of the world’s second largest economy. A swathe of inflation prints from Australia to Japan and the Eurozone are also due as traders finesse bets on the outlook for monetary policy.

In commodities, oil and gold nudged up. This year has witnessed a rolling series of commodity price spikes thanks to supply constraints, surging demand and even some speculative activity. The Organization of Petroleum Exporting Countries and its partners are set to gather online on 2 June to discuss supply cuts.

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