- Asian Stock Markets:
- Nikkei up 1.1%, US stock futures steady
- Euro rises due to different interest rate outlook
- US retail sales data, bank profits at risk
SYDNEY, April 14 (Reuters) – Asian stocks strengthened on Friday as Singapore became the latest country to halt monetary tightening and markets grew more confident that the likely next hike in US interest rates would be the last of the cycle would.
The dovish signals helped the unyielding gold stay near the one-year high, while the euro led the monetary package as the European Central Bank remains stubbornly hawkish.
The Monetary Authority of Singapore (MAS) surprised many by leaving policy unchanged, saying tightening already underway would ensure inflation slowed sharply later this year.
The MAS joined central banks in Canada, Australia and India in putting rate hikes on hold, while the US Federal Reserve was more of a pause after a weak PPI report.
Futures still imply a 68% chance of the Fed raising rates in May, but then almost no chance of another hike and maybe 50 basis points of cuts by the end of the year.
US Retail Sales figures are due later in the session and some analysts are warning of the risk of a downside surprise that would support the dovish turn.
The prospect of a peak in interest rates helped offset recession concerns, and MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) rose 0.6%.
Japan’s Nikkei (.N225) was up 1.1% and Singapore stocks (.STI) were up 0.4%.
Chinese blue chip (.CSI300) was up 0.4% as a better-than-expected trade performance lifted the economic outlook.
“Stronger-than-expected Chinese export growth in March suggests the economic recovery is more broadly based than we had anticipated, and we have revised upwards our Q1 GDP forecast,” analysts at JPMorgan wrote in a statement Communication. You’re now looking at a seasonally adjusted annual growth rate of 10.2%, up from 9.0% previously.
EUROSTOXX 50 futures were up 0.3% and FTSE futures were up 0.2%. S&P 500 futures and Nasdaq futures were steady overnight after sharp gains.
Investors are now bracing for gains from Citigroup Inc (CN), Wells Fargo (WFC.N) and JPMorgan Chase & Co (JPM.N) which could test bullish sentiment amid recent sector stress.
“We will be looking at bank earnings calls to follow discussions on deposits, lending standards and any planned bank funding adjustments, including further debt sales,” analysts at NatWest Markets said.
EUROS ON A ROLL
The hawks make the most noise at the European Central Banks.
With EU industrial production beating expectations and inflation proving resilient, markets are pricing in at least 50 basis points more tightening and no cuts this year.
The divergence caused the spread between US 10-year Treasury yields and German Bund yields to narrow by almost 100 basis points to the smallest in two years.
A break below 100 basis points would take the spread to its tightest since early 2014 when the euro was up $1.3600. On Friday, the single currency was firm at $1.1067 after hitting a yearly high of $1.1075.
The euro was also near highs recorded in November above 146.00 yen and jumped to a 10-month high against the Singapore dollar following the MAS decision.
The dollar remained relatively stable against the yen at 132.51 yen, helped by the Bank of Japan’s loose monetary policy.
Bank of Japan Governor Kazuo Ueda said Thursday he had told his G20 peers that the central bank was likely to keep monetary policy ultra-loose.
All the talk of future US interest rate cuts has given underperforming gold a boost, with the yellow metal rising at $2,042 an ounce after hitting an overnight high of $2,048.71 for the year, not far from its all-time high of $2,069. $89 removed.
Oil prices firmed as planned cuts offset OPEC’s summer oil demand warnings in a monthly report.
Brent rose 30 cents to $86.39 a barrel, while US crude rose 37 cents to $82.53 a barrel.
Reporting by Wayne Cole; Adaptation of Lincoln Feast.
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