Global stocks began an event-filled week on the front foot on Monday, as investors took heart from growing expectations of a Federal Reserve rate cut in December even as policymakers remain divided over such a move.
Markets were gearing up for potential catalysts, including the release of U.S. retail sales and producer prices data due later in the week, while British finance minister Rachel Reeves is also set to unveil her highly anticipated budget.
Trading was thinned with Japan markets closed for a holiday, but MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4% and South Korea’s tech-heavy Kospi index was up 0.7%.
Nasdaq futures and S&P 500 futures rose 0.64% and 0.45%, respectively, while EUROSTOXX 50 futures advanced 0.78%.
Fed funds futures now point to a 57% chance that the Fed will cut by 25 basis points next month, up from less than a 30% chance a week ago.
The main focus in the currency market was on the yen, which fell 0.2% to 156.72 per dollar and remained pinned near a 10-month trough.
Asian markets mostly rose as fresh hopes for a US interest rate cut provided some calm after last week’s rollercoaster ride, fuelled by worries of a tech bubble.
The scramble to snap up all things AI has helped propel equities skywards this year, pushing several companies to records — with chip titan Nvidia last month becoming the first to top $5 trillion.
But investors have grown increasingly fearful that the vast sums pumped into the sector may have been overdone and could take some time to see profits realised, leading to warnings of a possible market correction.
That has been compounded in recent weeks by falling expectations that the Federal Reserve will cut rates for a third successive time next month as stubbornly high inflation overshadows weakness in the labour market.
However, risk appetite was given a much-needed shot in the arm Friday when New York Fed boss John Williams said he still sees “room for a further adjustment” at the bank’s December 9-10 policy meeting.
The remarks saw the chances of a cut shoot up to about 70 percent, from 35 percent earlier.
Focus is now on the release this week of the producer price index, which will be one of the last major data points before officials gather, with other key reports postponed or missed because of the government shutdown.
“The reading carries heightened importance following the postponement of October’s personal consumption expenditures report, originally scheduled for 26 November, which removes a key datapoint from policymakers’ assessment framework,” wrote IG market analyst Fabien Yip.
“A substantially stronger-than-expected PPI outcome could reinforce concerns that inflationary pressures remain entrenched, potentially constraining the Fed’s capacity to reduce rates in December despite recent labour market softening.”
After Wall Street’s rally Friday capped a torrid week for markets, Asia mostly started on the front foot.
Hong Kong and Seoul jumped more than one percent, while Sydney, Singapore, Wellington, and Taipei were also well up, though Shanghai and Manila retreated. US futures advanced.
Tokyo was closed for a holiday.
But while the mood is a little less fractious than last week, uncertainty continues to weigh on riskier assets, with bitcoin hovering around $87,000.
While that is up from its seven-month low of $80,553, it is still sharply down from its record $126,200 hit last month.
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– Key Figures At Around 0230 GMT –
Hong Kong – Hang Seng Index: UP 1.4 percent at 25,568.08
Shanghai – Composite: DOWN 0.1 percent at 3,829.71
Tokyo – Nikkei 225: Closed for a holiday
Dollar/yen: UP at 156.70 yen from 156.39 yen on Friday
Euro/dollar: DOWN at $1.1515 from $1.1519
Pound/dollar: DOWN at $1.3096 from $1.3107
Euro/pound: UP at 87.92 pence from 87.88 pence
West Texas Intermediate: DOWN 0.2 per cent at $57.93 per barrel
Brent North Sea Crude: DOWN 0.2 per cent at $62.44 per barrel
New York – Dow: UP 1.1 per cent at 46,245.41 (close)
London – FTSE 100: UP 0.1 per cent at 9,539.71 (close)
AFP
