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Asian Stock Markets: https://tmsnrt.rs/2zpUAr4
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Nikkei rises 1%, Hong Kong 0.6% after China PMIs beat forecasts
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2-year government bonds experience biggest monthly rally since 2008
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Euro up 3% this month, yen up 2.5%, gold up 8%
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Markets await Euro-zone inflation, US PCE data
By Stella Qiu
SYDNEY, Mar 31 (Reuters) – Asian equities headed for a second quarterly gain on Friday, while bonds enjoyed their best month since 2008, but the market was braced for a stormy session after a positive surprise in German CPI set the stakes for the US had increased inflation data.
Donald Trump, who also made headlines on Friday, was indicted after an investigation into hush-hush payments to porn star Stormy Daniels was conducted, becoming the first former US president to be prosecuted despite running for the White House again .
Good sentiment is likely to face resistance in Europe, with caution over euro-zone inflation data. Pan-regional Euro Stoxx 50 futures were flat, while S&P 500 futures returned 0.2%.
In Asia, MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.7% on Friday, heading for its first March gain in four years with a rise of 2.5% amid fears a global banking crisis subsided.
It’s on track for a 3.6% quarterly gain after rising 12% in the three months to December.
Japan’s Nikkei was also up 1% as inflation data for the capital Tokyo highlighted widening price pressures.
China’s blue chips rose 0.2%, while Hong Kong’s Hang Seng index rose 0.6% most recently, after China’s PMI data showed the services sector recovery was gaining momentum and manufacturing activity was expanding faster-than-expected.
Investors hailed a major restructuring plan by Alibaba Group, taking it as a signal that Beijing’s regulatory crackdown on tech companies was ending. Alibaba’s shares rose 3.5% on Friday, bringing the weekly gain to a whopping 17%.
Chinese e-commerce firm JD.com Inc rose 6% after the company announced it would spin off its real estate and industrials units.
The story goes on
On Thursday, Wall Street was boosted by gains in technology-related stocks, although regional bank stocks fell after Treasury Secretary Janet Yellen said banking regulations and prudential rules needed to be reviewed.
The Dow Jones was up 0.4%, the S&P 500 was up 0.6% and the Nasdaq Composite was up 0.7%.
Markets are shifting their focus back to inflation and the prospects for rate hikes on hopes that the recent banking turmoil has been largely contained.
A slower-than-expected decline in German inflation has raised the stakes for euro-zone consumer inflation and US private consumption (PCE) inflation, which will be tracked by the Federal Reserve for monetary policy later in the day.
Economists expect the PCE index to fall to 0.4% in February after rising 0.6% in January.
However, the expectation remains that banks will cut lending after the problems at US regional banks and the Credit Suisse takeover, so central banks need not hike any further.
“The underlying source of these stresses related to interest rates, inverted yield curves etc. is still with us so these stressors have not gone away. I suspect we will see bouts of volatility in the markets in 2023,” said Herald van der Linde, head of equity strategy for Asia at HSBC.
“If we look up to the end of the year, I think China could do very well,” van der Linde said, adding that the Hong Kong H-share market, which is sensitive to lower U.S. yields, is showing a 20% uptrend at the prices.
Fed fund futures are still divided on whether or not the Federal Reserve will hike at the next policy meeting in May, while pricing in a rate cut by November. This compares to an overwhelming bet for a 25 basis point hike a month ago, before bank volatility kicked in.
Overnight, three Fed officials kept the door open for more rate hikes, although two of them noted that problems in the banking sector could create enough headwinds for the economy to ease price pressures faster than expected.
US Treasuries had a blockbuster month, with 2-year yields falling a whopping 68 basis points to 4.1120%, the largest monthly decline since early 2008. 10-year yields fell 35 basis points this month to 3.5602%.
Movements in currency markets were muted on Friday, but the US dollar is on track for a 2.7% monthly decline against six of its peers.
The euro, which hit a one-week high against the dollar on overnight German inflation data, is facing a monthly jump of 3% to $1.0902, while the yen, which has benefited from safe-haven flows, is one Gain of 2.5% is heading for the month.
Oil prices fluctuated on Friday, falling more than 3% over the month. US crude futures were flat at $74.40 a barrel, while Brent crude futures were down 0.1% to $78.52 a barrel.
Gold hovered around its highest level since April of last year, up more than 8% this month to $1,980.20 an ounce.
(Reporting by Stella Qiu; Additional reporting by Divya Chowdhury in Mumbai; Editing by Sonali Paul and Jacqueline Wong)
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