Asian Stocks Extend Global Rally; Oil Pares Gain: Markets Wrap

Asian shares surged, extending a rally in global equities that continues to defy concern over risks to economic growth and elevated interest rates. Oil trimmed an earlier jump.

(Bloomberg) — Asian shares surged, extending a rally in global equities that continues to defy concern over risks to economic growth and elevated interest rates. Oil trimmed an earlier jump.

Crude pared its gain to around 1% after surging as high as 4.6% on Saudi’s pledge to make an extra 1 million barrel-a-day reduction in July, which trims Saudi Arabia’s production to the lowest level for several years.

Stock benchmarks in Japan and Australia advanced more than 1% Monday while South Korea’s Kospi rose about 0.5%. Shares in Hong Kong climbed back up, along with Shanghai’s main index, following the release of the Caixin’s services purchasing managers’ index, which showed improvement in activities in May.

Contracts for the S&P 500 were marginally lower in Asia after further gains Friday took the underlying measure to the cusp of a bull market. An MSCI Inc. gauge of equities across developed and emerging markets is at the highest since May last year, despite increasing worries about an economic slowdown in China and the prospect of higher interest rates in the US.

Gains in the US on Friday were fueled by big tech, options positioning and bets for a Fed to hold rates unchanged this month, before a likely increase in July.

A mixed jobs report shaped the wagers on the Fed, with signs of labor-market slackening in May despite a pickup in hiring. That bolstered the argument from Fed Chair Jerome Powell and other officials that they should take more time to assess incoming data and the evolving outlook before raising rates again.

Two-year Treasury yields, which are more sensitive to imminent central bank moves, rose four basis points, adding to an increase of 16 basis points on Friday. Australia’s three-year government bond yields jumped about 11 basis points following the move in Treasuries and ahead of a central bank rates decision Tuesday.

A gauge of dollar strength was fractionally higher, in part reflecting rising US yields. The euro, the pound and the Australian dollar moved lower while the yen weakened past 140 versus the greenback.

Meanwhile, Morgan Stanley sees the possibility of a 16% profit drop for the S&P 500 this year that would slam the brakes on a US equity rally. The prediction is one of the most bearish among those tracked by Bloomberg, and contrasts with bullish forecasts from the likes of Goldman Sachs Group Inc., which anticipates mild growth.

Key events this week:

Eurozone S&P Global Eurozone Services PMI, PPI, Monday
US factory orders, ISM services, Monday
ECB President Christine Lagarde appears in European Parliament, Monday
Rate decisions in Australia, Poland, Tuesday
China forex reserves, trade, Wednesday
US trade, consumer credit, Wednesday
Canada rate decision, Wednesday
EIA crude oil inventory data, Wednesday
Eurozone GDP, Thursday
Rate decisions in India, Peru, Thursday
Japan GDP, Thursday
US wholesale inventories, initial jobless claims, Thursday
China PPI, CPI, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 12:20 p.m. Tokyo time. The S&P 500 rose 1.4% Friday
Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 0.7%
Japan’s Topix rose 1.3%
Australia’s S&P/ASX 200 rose 1.2%
Hong Kong’s Hang Seng rose 0.4%
The Shanghai Composite rose 0.2%
Euro Stoxx 50 futures were little changed

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0700
The Japanese yen fell 0.1% to 140.10 per dollar
The offshore yuan was little changed at 7.1145 per dollar
The Australian dollar was little changed at $0.6604

Cryptocurrencies

Bitcoin fell 1.6% to $26,827
Ether fell 1.7% to $1,871.46

Bonds

The yield on 10-year Treasuries advanced three basis points to 3.72%
Japan’s 10-year yield advanced 1.5 basis points to 0.425%
Australia’s 10-year yield advanced 10 basis points to 3.74%

Commodities

West Texas Intermediate crude rose 1.1% to $72.56 a barrel
Spot gold fell 0.1% to $1,945.22 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth.

(An earlier version of this story was corrected to show the MSCI gauge was at the highest since May of last year)

More stories like this are available on bloomberg.com