(Bloomberg) — Asian stocks are expected to rise in early trading after U.S. stocks hit a new record high amid resilient corporate profits and China moves to shore up its real estate market.
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Stock futures in Australia, Hong Kong and mainland China pointed to early gains when trading resumed on Monday, while contracts in Japan edged lower. U.S. stock futures edged higher after the benchmark S&P 500 rose Friday and the Dow Jones Industrial Average closed above 40,000 for the first time in its 128-year history.
Traders will turn their attention to China on Monday after Beijing’s attempt to rescue the country’s beleaguered property market, although concerns persist that the measures may be too modest. They will also watch for signs of an escalation in trade discourse with Europe. The recent rally in Chinese stocks has spilled over into Asian stocks, with the MSCI Asia-Pacific index climbing for six straight days, matching its longest winning streak this year.
Even though risks to China’s financial stability have been mitigated, “the key variable is whether economic fundamentals also become more favorable, as it remains unclear how the central government plans to achieve this growth target.” about 5%,” said Kyle Rodda, a senior Chinese economic official. analyst at Capital.com in Melbourne. “However, in the short term, given depressed valuations and sentiment, there is significant room for further rise in Chinese indices.”
US stocks edged higher on Friday as Wall Street’s “fear gauge” – the VIX – fell below 12 to its lowest level since November 2019 following a week of weak economic data, confirming expectations that which the Federal Reserve would lower its key rates later this year.
That momentum and a strong corporate earnings season have led many strategists, including Deutsche Bank AG and UBS Group AG, to revise upward their forecasts for U.S. stocks this year. Citi’s Levkovich Index, a contrarian indicator that measures traders’ attitudes toward stocks, has returned to euphoric territory, implying a lower likelihood of positive returns over the year to come.
“May has conquered the seasonal curse of sell-offs and disappearances,” said Bob Savage, head of strategy and market insights at BNY Mellon. “The ‘unperplexed’ nature of the current period will not last, but the lesson of the past week is to enjoy the moment. The absence of larger shocks to the world over the past week is striking and leads to an extension of the risk recovery in May.
The greenback slipped 0.7% last week to its lowest level in more than a month as traders bet the Federal Reserve could cut interest rates as soon as September, after inflation in April decreased more than expected. While Treasury yields rose on Friday, they have fallen over the past week. Policy-sensitive two-year Treasuries have fallen more than 20 basis points since their April peak. Australian 10-year yields rose Monday in early trading in Asia.
Nonetheless, officials including Federal Reserve Governor Michelle Bowman reiterated that they expected cost pressures to remain elevated for “some time” but continued to expect Price pressures will eventually ease with interest rates remaining at the current level. A slew of Fed officials are expected to speak this week, including Governor Christopher Waller, who is expected to speak specifically on the U.S. economy and monetary policy.
“We continue to expect the Fed to cut rates by 50 basis points this year, with further reductions in 2025 and 2026,” said Solita Marcelli, chief investment officer for the Americas region at UBS Global Wealth Management . “This creates a favorable macroeconomic environment that supports our investment recommendation in favor of quality bonds and stocks.”
Elsewhere, oil and gold were stable in early trading, while Israel’s three-man war cabinet was in turmoil. Meanwhile, Iranian President Ebrahim Raisi is missing after his helicopter crashed in thick fog while returning from a visit to the country’s northwest.
This week, traders will be looking at economic activity figures from Europe as well as inflation figures from the UK, Canada and Japan. Policy decisions in New Zealand, Indonesia, South Korea and Chile are also expected, while Nvidia Corp. should publish its results.
Some notable events this week:
Prime rates for Chinese loans, Monday
GDP of Thailand, Monday
BOE Deputy Governor Ben Broadbent speaks on monetary policy transmission on Monday
GDP of Chile, Monday
The Reserve Bank of Australia releases minutes of its May policy meeting on Tuesday
Canadian CPI, Tuesday
Fed Governor Christopher Waller speaks on the US economy and monetary policy on Tuesday.
BOE Governor Andrew Bailey delivers lecture Tuesday
New Zealand rate decision Wednesday
Indonesia rate decision on Wednesday
IPC South Africa, Wednesday
UK CPI, Wednesday
FOMC Minutes from April 30-May 1 Policy Meeting, Wednesday
CPI, Singapore GDP, Thursday
South Korea rate decision Thursday
India S&P Global Manufacturing & Services PMI, Thursday
Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, consumer confidence, Thursday
New home sales in the United States and first unemployment claims, Thursday
Chile rate decision Thursday
Japan CPI, Friday
German GDP, Friday
Malaysia CPI, Friday
U.S. Durable Goods, University of Michigan Consumer Sentiment, Friday
Some of the main market movements:
Actions
S&P 500 futures rose 0.1% as of 8:28 a.m. Tokyo time
Hang Seng futures rose 0.8%
S&P/ASX 200 futures rose 0.4%
Nikkei 225 futures fell 0.1%
Currencies
The euro was little changed at $1.0873
The Japanese yen was little changed at 155.73 per dollar
The offshore yuan was little changed at 7.2346 per dollar.
The Australian dollar was little changed at $0.6698.
Obligations
Cryptocurrencies
Bitcoin rose 0.1% to $66,253.48
Ether little changed at $3,071.95
Raw materials
West Texas Intermediate crude fell 0.2% to $79.87 a barrel
Spot gold rose 0.2% to $2,419.34 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Richard Henderson.
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