(Bloomberg) — Stocks in Asia rose on bets that the next U.S. consumer price report will allow the Federal Reserve to begin easing monetary policy in September. The New Zealand dollar fell following a surprise rate cut by the country’s central bank.
Bloomberg’s Most Read
The MSCI Asia Pacific index rose for a fourth session, with shares in New Zealand and Taiwan jumping around 1%. The gains came after the U.S. producer price index rose less than forecast, helping fuel a 1.7% rally in the S&P 500. Japanese stocks fluctuated as the yen strengthened.
Easing price pressures in the US have reinforced confidence that authorities can begin to reduce borrowing costs and refocus on supporting the labor market. In Asia, the earlier than expected start of an easing cycle in New Zealand has the potential to reshape interest rate dynamics, with the Central Bank typically seen as the leader of the region’s monetary cycle.
“Global markets seem to be giving the signal that all is well following last week’s recession scare,” said Jun Rong Yeap, strategist at IG Asia Pte. “Further progress in U.S. producer price inflation, which may also be a precursor to further easing in consumer prices, provided additional impetus to the risk recovery.”
Treasuries were little changed after rising across the curve in the previous session, with positioning data showing traders remained bullish. A Bloomberg dollar gauge has stabilized around a four-month low.
Yields on New Zealand’s benchmark 10-year bond fell as the central bank hinted at more rate cuts in the future, while the local currency weakened 0.8% against the dollar.
In Japan, the Nikkei erased gains following news that Prime Minister Fumio Kishida will not run for a second term as leader of the long-ruling Liberal Democratic Party in September. The yen reversed losses against the dollar and strengthened towards the 146 per dollar mark.
Emerging market currencies strengthened in the face of dollar weakness overnight. The MSCI EM Currency Index reached its highest level since April 2022, rising 0.4%.
China’s profits
Elsewhere in Asia, Chinese shares fell following data that showed bank lending to the real economy contracted for the first time in 19 years. Investors await Tencent Holdings Ltd.’s earnings and its buyback plans.
“This week’s reports from Chinese internet giants will be very important to see if China’s consumer weakness weighs on margins and ROIs, and which vertical subsegments like gaming may be brighter spots,” said Britney Lam, head of long/short shares in Magellan Investments Holding Ltd. “Valuation is attractive, but earnings momentum is key.”
Overnight, the S&P 500 saw its biggest four-day rally this year. The Nasdaq 100 rose 2.5%.
Wall Street’s favorite volatility indicator – the VIX – has fallen to around 18. Swap traders have priced in a cut of around 40 basis points from the Fed in September and a total rate reduction of more than 105 basis points for 2024.
The US producer price index for final demand increased 0.1% from the previous month, less than the 0.2% seen in a median forecast. For the data to be released on Wednesday, analysts expect the consumer price index and a “leading” indicator that excludes food and energy to have advanced 0.2% in July, in line with the median estimate from a Bloomberg survey.
“The path is clear for the Fed to cut rates in September,” said Jamie Cox of Harris Financial Group. “If data like this persists, the Fed will have plenty of room to cut rates further this year.”
Oil rose in Asian trading, recovering from losses on Tuesday, as an industry report pointed to a sizable draw in U.S. crude inventories and tensions rose in the Middle East. Gold fell.
Main events this week:
-
Eurozone GDP, industrial production, Wednesday
-
US CPI Wednesday
-
China home prices, retail sales, industrial production, Thursday
-
U.S. initial unemployment claims, retail sales, industrial production, Thursday
-
Fed’s Alberto Musalem and Patrick Harker speak on Thursday
-
US Housing Starts, University of Michigan Consumer Sentiment, Friday
-
Fed’s Austan Goolsbee Speaks on Friday
Some of the main movements in the markets:
Actions
-
S&P 500 futures were little changed as of 11:44 a.m. Tokyo time
-
Nasdaq 100 futures little changed
-
Japan’s Topix rose 0.5%
-
Australia’s S&P/ASX 200 rose 0.6%
-
Hong Kong’s Hang Seng fell 0.2%
-
The Shanghai Composite fell 0.3%
-
Euro Stoxx 50 futures rose 0.1%
Coins
-
The Bloomberg Dollar Spot index was little changed
-
The euro was little changed at $1.0992
-
The Japanese yen rose 0.4% to 146.30 per dollar
-
The offshore yuan was little changed at 7.1460 per dollar
Cryptocurrencies
-
Bitcoin rose 0.3% to $60,798.13
-
Ether rose 0.2% to $2,706
Titles
Goods
-
West Texas Intermediate crude rose 0.6% to $78.83 a barrel
-
Spot gold fell 0.2% to $2,460.02 an ounce
This story was produced with help from Bloomberg Automation.
Bloomberg Businessweek Most Read
©2024 Bloomberg LP
