(Bloomberg) — Asian stocks are expected to rise in early trading as markets analyze Federal Reserve Chairman Jerome Powell’s reminder that policymakers are in no rush to ease interest rates. Gold and oil are rising.
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Australian stocks rebounded while stock futures in Japan and Hong Kong pointed to early gains. The S&P 500 index climbed on Friday, closing a fifth week and reaching its highest level since March 2022. Contracts in mainland China point to an early loss after the Golden Dragon index – a gauge of U.S.-listed Chinese stocks – United States – fell 1% in its last session.
U.S. stocks and bonds rallied on Friday as Powell noted that policy was “well into restrictive territory,” while still being prepared to increase further if necessary. The dollar slipped, two-year Treasury yields fell to their lowest level since June and traders increased their bets on a quarter-point Fed cut in March, with swaps fully pricing in a cut in may. They forecast an easing of a full point by December 2024. Australian yields fell early Monday, following Treasuries.
“The significant rebound in stocks has left them technically overbought and at risk of a near-term consolidation or pullback,” wrote Shane Oliver, head of investment strategy and chief economist at AMP Ltd. in Sydney, in a note to clients. “However, further gains are likely through the end of the year and early next year as inflation continues to slow” and positive market seasonality kicks in later this month – this, he declared.
The recent rebound in U.S. stocks and bonds comes as signs mount — in recent data, in warnings from major retailers and in anecdotes from local businesses across the country — that they have defied expectations all year round and splurges during the summer, American households are starting to decline. A measure of U.S. industrial activity declined for a 13th straight month in November as high interest rates continue to hurt the goods-producing side of the economy.
Oil rose while gold traded at a record high as investors monitored geopolitical tensions in the Middle East. Israel resumed military operations in Gaza, a US warship was attacked in the Red Sea and Houthi rebels in Yemen said they carried out operations against two Israeli ships.
Elsewhere, Bitcoin hit $40,000 for the first time since May 2022, extending the year’s rebound amid bets on lower interest rates and increased demand from exchange-traded funds .
Read more: Eerie Calm in the S&P 500 Signals Historic Rally Has Power
Sticky inflation
This week, traders will be watching clues on the health of the global economy with Australian growth, Chinese inflation and US non-farm payrolls data. The Reserve Bank of Australia is expected to be hawkish by keeping rates unchanged on Tuesday after Governor Michele Bullock warned inflation was now homegrown.
While lower-than-expected inflation will keep the RBA on hold, “persistent ‘home-grown’ services inflation will ensure a tightening bias remains,” wrote Tony Sycamore, an analyst at IG Group in Sydney, in a note to customers. “A rate hike in February depends on December quarter inflation results, which are due to be released at the end of January.”
On the corporate side, China Evergrande Group, the world’s most indebted property developer, will face a Hong Kong court hearing on Monday following a request from a creditor to liquidate the company. U.S. airline stocks will be in focus when Wall Street reopens Monday after Alaska Air Group Inc agreed to buy Hawaiian Airlines, rival Hawaiian Holdings Inc., in a deal valued at $1.9 billion.
Key events this week:
China Evergrande Group liquidation hearing in Hong Kong begins Monday
Riskbank November meeting minutes released Monday
RBA rate decision Tuesday
Japan’s CPI in Tokyo on Tuesday
China Caixin services PMI, Tuesday
South Korea’s CPI and GDP, Tuesday
Eurozone PMI, Tuesday
Australia GDP data, Wednesday
Eurozone retail sales, Wednesday
Bank of Canada rate decision Wednesday
Chinese trade and foreign exchange reserves, Thursday
Eurozone GDP, Thursday
Mexico CPI, Thursday
German CPI, Friday
Japanese household spending, GDP, Friday
Nonfarm jobs in the United States, Friday
Some of the main market movements:
Actions
S&P 500 futures were little changed as of 8:27 a.m. Tokyo time.
Hang Seng futures rose 0.3%
Australia’s S&P/ASX 200 rose 1.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.4%
The euro rose 0.1% to $1.0895
The Japanese yen rose 0.4% to 146.29 per dollar
The offshore yuan was little changed at 7.1268 per dollar.
The Australian dollar rose 0.2% to $0.6689.
Cryptocurrencies
Bitcoin rose 0.4% to $39,873.63
Ether rose 0.1% to $2,186.3
Obligations
Raw materials
West Texas Intermediate crude rose 1.2% to $74.95 a barrel
Spot gold rose 1.2% to $2,098.01 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Michael G. Wilson.
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