Passers-by are reflected on an electric stock listing board outside a brokerage firm in Tokyo, Japan, April 18, 2023. REUTERS/Issei Kato/File Photo Acquire License Rights
- Asian stock markets:
- Nikkei rises 2.4%, S&P 500 futures consolidate gains
- Bonds were rescued as markets priced in an imminent easing of monetary policy
- The dollar is hovering near six-week lows
SYDNEY, Nov 6 (Reuters) – Asian shares rallied for a fourth straight session on Monday after markets priced in earlier interest rate cuts in the United States and Europe, optimistic bets that will be examined by a bevy of central bank speakers this week .
Beleaguered bond markets also enjoyed a welcome rebound as a positive US jobs report and positive productivity numbers suggested the labor market had cooled enough to not require further interest rate hikes from the Federal Reserve.
“This year’s supply-side developments in the U.S. suggest a soft landing,” said Bruce Kasman, head of economic research at JPMorgan.
“By promoting disinflation, strong productivity and labor force gains could enable simultaneous job growth and low inflation,” he added. “This in turn would pave the way for Fed easing soon.”
Fluctuations in futures markets suggested that there was a 90% chance that the Fed would finish raising interest rates and that there was an 86% chance that the first easing of monetary policy would come as early as June.
Markets also expect the European Central Bank to cut interest rates by April with a probability of around 80%, while the Bank of England is expected to ease in August.
Central bankers have their own chance to weigh in on this dovish outlook, with at least nine Fed members speaking this week, including Chairman Jerome Powell. Also on the program are speakers from the BoE and the ECB.
A special case is Australia’s central bank, which is believed to be likely to raise interest rates again at its policy meeting on Tuesday as inflation remains stubbornly high.
The Bank of Japan is also on the path to tightening, albeit at a rapid pace. The central bank chief said on Monday that it had moved closer to its inflation target, but it was still not enough to end ultra-loose policies.
Elsewhere, hopes of lower borrowing costs helped MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gain 2.0%, after rising 2.8% last week and off one-year lows removed.
Japan’s Nikkei (.N225) rose another 2.4% after rising 3.1% last week, while South Korea (.KS11) rose 4.3% as authorities reimposed a short-selling ban until mid-2024 .
Chinese blue chips (.CSI300) rose 1.3% ahead of trade and inflation data this week.
S&P 500 futures and Nasdaq futures were both unchanged. The EUROSTOXX 50 futures also barely moved, while the FTSE futures rose slightly by 0.1%.
Binding relief
The two-year Treasury yield remained at 4.86%, after falling 17 basis points last week. The 10-year bond yield stood at 4.586%, some distance from October’s painful peak of 5.021%.
“We continue to believe that the Fed, ECB and BoE rate cuts will come somewhat sooner than markets are pricing in and are likely to be bolder in size in the early stages,” the analysts wrote from NatWest Markets in a note. “We expect the Fed funds rate to fall to 3-3.25%, the ECB deposit rate to 3% and the BoE bank rate to 4.25% by the end of 2024.”
The fall in Treasury yields pulled the rug out from under the dollar, which was at 105.080 after falling 1.3% last week to its lowest level since late September.
The euro was steady at $1.0735 after rising 1% to its highest in two months on Friday. The dollar actually lost ground against the battered yen, trading at 149.52, well off its recent high of 151.74.
The decline in the dollar and yields helped support gold prices at $1,983, close to the recent five-month high of $2,009.
Oil prices rose slightly after falling 6% last week on confirmation that Saudi Arabia and Russia would continue their additional voluntary oil production cuts.
In the Middle East, Israel on Sunday rejected growing calls for a ceasefire in Gaza. Military experts said the armed forces were ready to step up operations against the Palestinian Islamist group Hamas.
Brent rose 43 cents to $85.32 a barrel, while U.S. crude rose 54 cents to $81.05 a barrel.
Reporting by Wayne Cole; Editing by Sam Holmes
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