Asian shares firmed on Monday as investors braced for a busy run of inflation data that could set the scene for a European rate cut as soon as next week and a U.S. policy easing within just a few months.
Holidays in Britain and the United States made for thin trading ahead of Friday’s figures on core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation.
Median forecasts are for a rise of 0.3% in April, keeping the annual pace at 2.8%, with risks on the downside.
“Consumer and producer price data suggest core PCE inflation lost further momentum in April after a strong start to the year,” analysts at TD Securities said in a note.
“Indeed, we look for the core index to advance 0.22% m/m vs 0.32% in March and an initial 0.25% estimate,” they added.
“We also look for the headline to rise 0.23% m/m while the super core likely cooled to 0.26%.”
Figures for inflation in the euro zone are also due on Friday and an expected tick up to 2.5% should not stop the European Central Bank from easing policy next week.
Policy makers Piero Cipollone and Fabio Panetta both flagged a coming cut over the weekend, while markets imply an 88% chance of an easing to 3.75% on June 6.
The ECB’s chief economist told the Financial Times newspaper that the central bank was ready to start cutting, but policy would still need to be restrictive this year.
The Bank of Canada might also ease next week, while the Fed is seen waiting until September for its first move.
At least eight Fed officials are due to speak this week, including two appearances by the influential head of the New York Fed John Williams.
The head of the Bank of Japan (BOJ) said on Monday it would proceed cautiously with inflation-targeting frameworks, adding that some challenges were “uniquely difficult” for Japan after years of ultra-easy monetary policy.
The BOJ holds its policy meeting on June 14 and there is some chance it may buck the global trend and hike rates again, albeit to a modest 0.15%.
TECH BULLS
The prospect of lower borrowing costs across much of the globe has been positive for equities and commodities, though many markets did run into profit-taking last week.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6%, having slipped 1.5% last week and away from a two-year peak.
Taiwan stocks reached a record, having climbed more than 7% for the month so far on a tide of tech bullishness. Japan’s Nikkei .N225 rose 0.5%, ahead of a reading on Tokyo consumer prices later in the week.
Chinese blue chips firmed 0.4%, with the major release this week being surveys of manufacturing and services for May on Friday.
EUROSTOXX 50 futures eased 0.1%, while trade in FTSE futures was closed.
S&P 500 futures ESc1 dipped 0.1%, as did Nasdaq futures. The Nasdaq hit record highs last week after Nvidia beat expectations.
Indeed, Nvidia alone has accounted for a quarter of the S&P 500’s gains this year, while the “Magnificent Seven” tech darlings are up 24% for the year.
In currency markets, attention was again centred on the yen and the risk of Japanese intervention ahead of the 160.00 level. The dollar stood at 156.78 yen, having added 0.9% last week and close to its recent top of 160.245.
Japan renewed its push to counter excessive yen falls during a weekend gathering of Group of Seven (G7) finance leaders, after a recent rise in bond yields to a 12-year high failed to slow the currency’s decline.
The euro was steady at $1.0847, and short of its recent top at $1.0895.
Gold was holding at $2,342, having recoiled 3.4% last week and off an all-time peak of $2,449.89.
Oil prices were stuck near four-month lows amid concerns about demand as the U.S. driving season gets underway this week. Investors are waiting to see if OPEC+ will debate new output cuts at an online meeting on June 2, though analysts doubt there will be a consensus for a move.
Brent was up 20 cents at $82.32 a barrel, while U.S. crude rose 27 cents to $77.99 per barrel.
(Reuters)