An index of Asian equities rose along with US and European futures amid optimism that the Federal Reserve will pause its most-aggressive tightening campaign in decades.
(Bloomberg) — An index of Asian equities rose along with US and European futures amid optimism that the Federal Reserve will pause its most-aggressive tightening campaign in decades.
Chinese shares bucked the trend, declining even after the People’s Bank of China cut a short-term policy interest rate to help aid the economy. The shift did have an impact in rates and currency markets, with Chinese bond yields sliding and the yuan weakening about 0.2% versus the dollar.
The lowering of the seven-day reverse repurchase rate Tuesday heightens attention on the PBOC’s monthly operation Thursday for its medium-term lending facility. Any shift here could provide more significant stimulus to the market, while also underscoring how much China is struggling to rebound from the pandemic.
“The rate-cut timing came a bit earlier than expected before the MLF yield roll-over day, suggesting that the PBOC may attempt to act ahead of the curve and Fed meeting to mitigate the rate-cut impact on the yuan,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank Ltd. in Hong Kong.
Japanese shares showed the biggest gains in the region, with the Topix rallying more than 1% in a third day of gains that have taken the index to the highest level since 1990. The Nikkei 225 advanced about 1.6%.
Contracts for US benchmarks rose slightly in Asia after the Nasdaq 100 and the S&P 500 closed at the highest levels since April 2022.
The two-year US Treasury yield, which is sensitive to imminent central bank moves, edged lower for a second day. The Bloomberg Dollar Spot Index was slightly lower as major currencies traded within ranges of about 0.2% against the greenback.
Beyond the immediate action of the Asia session, all eyes remain on the Federal Open Market Committee, which is expected to keep interest rates in the 5%-5.25% range on Wednesday, assuming that consumer price index data later Tuesday shows subdued inflationary pressure. The likelihood of a hike is higher in July, with swaps showing an almost quarter-point of additional tightening priced in by next month’s meeting.
Oil was fractionally higher after a heavy drop Monday that came as Goldman Sachs Group Inc. analysts cut their crude forecast for the third time in six months. Even with Saudi Arabia’s decision less than two weeks ago to cut 1 million barrels a day of production, the bank sees crude supplies swelling, and trimmed its year-end price estimate to $86.
On Monday in the US, Tesla Inc. climbed for a 12th straight session — a record winning run — and Apple Inc. hit an all-time high. KeyCorp and Citizens Financial Group Inc. led losses in banks after disappointing updates at an industry conference.
Oracle Corp. gained as its sales beat estimates, signaling the software maker’s cloud business is benefiting from demand for artificial intelligence workloads.
Key events this week:
- US CPI, Tuesday.
- Eurozone industrial production, Wednesday.
- US PPI, Wednesday.
- Federal Reserve rate decision, updated economic forecasts, Jerome Powell’s press conference, Wednesday.
- IEA oil market report, Wednesday.
- China property prices, retail sales, industrial production, Thursday.
- China central bank meeting to decide on one-year policy loan rate, Thursday.
- European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday.
- US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday.
- Bank of Japan rate decision, Friday.
- US University of Michigan consumer sentiment, Friday.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 12:00 p.m. Tokyo time. The S&P 500 rose 0.9%
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 1.8%
- Japan’s Topix rose 1.1%
- Australia’s S&P/ASX 200 was little changed
- Hong Kong’s Hang Seng fell 0.2%
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0775
- The Japanese yen rose 0.1% to 139.43 per dollar
- The offshore yuan fell 0.2% to 7.1696 per dollar
- The Australian dollar was little changed at $0.6746
Cryptocurrencies
- Bitcoin rose 0.9% to $26,122.38
- Ether rose 0.8% to $1,752.56
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.72%
- Japan’s 10-year yield declined one basis point to 0.415%
- Australia’s 10-year yield declined five basis points to 3.90%
Commodities
- West Texas Intermediate crude rose 0.5% to $67.48 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott and Chester Yung.
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