Asian stocks advanced on Monday as rates optimism returned ahead of a run of inflation data this week that could lay the ground for some easing in the weeks and months ahead.
Holidays in the UK and the United States made for thin trading, though, ahead of Friday’s figures on core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation.
Japan’s Nikkei share average was the first to edge ahead in Asian hours, tracking Wall Street higher, while the financial sector rallied to give the index an additional boost as Japan’s government bond yields hit fresh decade peaks.
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After slumping at the end of last week, the benchmark index rebounded, following a rise in US stocks overnight on Friday on news of an improving consumer outlook on inflation.
The Nikkei share average was up 0.66%, or 253.91 points, to close at 38,900.02, while the broader Topix was ahead 0.87%, or 23.82 points, to 2,766.36.
At the same time, questions about tapering of the Bank of Japan’s bond purchases and further policy rate hikes remained in focus, as BOJ Governor Kazuo Ueda and his deputy Shinichi Uchida spoke in the Asian morning and government yields continued to climb.
Shares of financial firms, which tend to benefit in a higher interest rate environment, rose in the afternoon session in response. The insurance sector was up 3.3% to lead gains among the Tokyo Stock Exchange’s 33 industry sub-indexes.
Chip-related shares also largely advanced, following a strong performance by their US peers on the back of Nvidia earnings last week.
Mainland China and Hong Kong shares also rose, led by coal stocks, while investor sentiment was lifted by growing industrial profits in April.
China’s industrial profits swung back into positive territory last month while growth over the first four months held steady, official data showed on Monday, suggesting policies to bolster the economy were starting to take effect.
Euro Rate Cut Bets
The CSI’s financial sector sub-index was up 0.7%, while coal stocks outperformed the markets, with a sub-index tracking the sector gaining 2.04%.
The Shanghai Composite Index rose 1.14%, or 35.17 points, to 3,124.04, while the Shenzhen Composite Index on China’s second exchange advanced 0.75%, or 13.04 points, to 1,747.83.
Chinese H-shares listed in Hong Kong – stocks belonging to companies from the Chinese mainland – rose 0.31% to 6,625.5, while the Hang Seng Index was up 1.17%, or 218.41 points, to 18,827.35.
Elsewhere across the region, in earlier trade, Sydney, Seoul, Mumbai, Singapore and Taipei all rose, though there were some losses in Jakarta, Bangkok, Manila and Wellington.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6%, having slipped 1.5% last week and away from a two-year peak.
Figures for inflation in the euro zone are also due on Friday and an expected tick up to 2.5% should not stop the European Central Bank from easing policy next week.
The ECB’s chief economist told the Financial Times newspaper that the central bank was ready to start cutting, but policy would still need to be restrictive this year.
Yen Drama Continues
The Bank of Canada might also ease next week, while the Fed is seen waiting until September for its first move.
At least eight Fed officials are due to speak this week, including two appearances by the influential head of the New York Fed John Williams.
Eurostoxx 50 futures eased 0.1%, while trade in FTSE futures was closed. S&P 500 futures dipped 0.1%, as did Nasdaq futures. The Nasdaq hit record highs last week after Nvidia beat expectations.
Indeed, Nvidia alone has accounted for a quarter of the S&P 500’s gains this year, while the “Magnificent Seven” tech darlings are up 24% for the year.
In currency markets, attention was again centred on the yen and the risk of Japanese intervention ahead of the 160.00 level. The dollar stood at 156.78 yen, having added 0.9% last week and close to its recent top of 160.245.
Japan renewed its push to counter excessive yen falls during a weekend gathering of Group of Seven (G7) finance leaders, after a recent rise in bond yields to a 12-year high failed to slow the currency’s decline.
Oil prices were stuck near four-month lows amid concerns about demand as the US driving season gets underway this week. Investors are waiting to see if OPEC+ will debate new output cuts at an online meeting on June 2, though analysts doubt there will be a consensus for a move.
Key figures
Tokyo – Nikkei 225 > UP 0.66% at 38,900.02 (close)
Hong Kong – Hang Seng Index > UP 1.17% at 18,827.35 (close)
Shanghai – Composite > UP 1.14% at 3,124.04 (close)
London – FTSE 100 <> CLOSED
New York – Dow > UP 0.01% at 39,069.59 (Friday close)
- Reuters with additional editing by Sean O’Meara
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