Asian shares began the week on the front foot, buoyed by hopes of a post-pandemic recovery in China and bets on a less aggressive US Fed.
Investors were in positive mood as China reopens after three tough years for its Covid-hit economy with the latest curbs rollback seeing the border with Hong Kong opened on Sunday.
That optimism fed into China’s markets on Monday with Chinese blue chips adding 0.7%, while Hong Kong shares climbed close to 2% and China’s yuan also firmed to its highest point since mid-August.
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Bank of America now expects China’s economy, the second-largest economy in the world, to benefit from a significant cyclical upturn in 2023.
The Hang Seng Index gained 1.89%, or 396.70 points, to 21,388.34.
The Shanghai Composite Index rose 0.58%, or 18.45 points, to 3,176.08, while the Shenzhen Composite Index on China’s second exchange edged up 0.68 percent, or 13.95 points, to 2,054.47.
Japan’s Nikkei was closed for a holiday but futures were trading at 26,215, compared with a cash close on Friday of 25,973.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.0% to a five-month top, with South Korean shares gaining 2.2%.
Indian stocks advanced with Mumbai’s signature Nifty 50 index up 1.29%, or 230.20 points, at 18,089.65.
S&P 500 futures added 0.2% and Nasdaq futures 0.3%. EUROSTOXX 50 futures gained 0.6%, while FTSE futures firmed 0.3%.
US Banks’ Earnings Season
Earnings season kicks off this week with the major US banks, with the Street fearing no year-on-year growth at all in overall earnings.
A sign of the strain came from reports Goldman would start cutting thousands of jobs across the firm from Wednesday, as it prepares for a tough economic environment.
But sentiment on Wall Street got a boost last week from a benign blend of solid US payroll gains and slower wage growth, combined with a sharp fall in service-sector activity, seeing the market scale back its bets on more rate hikes from the Federal Reserve.
Fed fund futures now imply around a 25% chance of a half-point hike in February, down from around 50% a month ago.
That will make investors ultra sensitive to anything Fed Chair Jerome Powell might say at a central bank conference in Stockholm on Tuesday.
Dollar Drop Boosts Gold
It also heightens the importance of US consumer price index (CPI) data on Thursday, which is forecast to show annual inflation slowing to a 15-month low of 6.5% and the core rate dipping to 5.7%.
Friday’s mixed data had already seen US 10-year yields drop a steep 15 basis points to 3.57%, while dragging the US dollar down across the board.
Early Monday, the euro was holding firm at $1.0673, having bounced from a low of $1.0482 on Friday. The dollar eased to 131.48 yen, away from last week’s top of 134.78, while its index was flat at 103.600.
The drop in the dollar and yields was a boon for gold, lifting it to an eight-month peak around $1,877 an ounce.
Oil prices were steadier, after sliding around 8% last week amid demand concerns.
Brent bounced 80 cents to $79.37 a barrel, while US crude rose 78 cents to $74.55 per barrel.
Key figures
Tokyo – Nikkei 225 <> CLOSED
Hong Kong – Hang Seng Index > UP 1.89% at 21,388.34 (close)
Shanghai – Composite > UP 0.58% at 3,176.08 (close)
London – FTSE 100 > UP 0.09% at 7,706.03 (0940 GMT)
New York – Dow > UP 2.13% at 33,630.61 (Friday close)
- Reuters with additional editing by Sean O’Meara
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