Asian equities began the week on the front foot, with China stocks leading the way boosted by strong home prices data and positive earnings signs in the world’s No2 economy.
Elsewhere across the region those gains were capped with the US earnings season getting underway and continuing uncertainty over the Fed’s rate hikes path for the months ahead.
Japan’s Nikkei share average ended at a more than one-month high, though, rising for the seventh straight session, as a weaker yen lifted exporters and bank shares tracked sharp gains of their US peers at the end of last week.
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The Nikkei share average edged up 0.08% at 28,514.78, its highest close since March 9 and posted its longest rally since mid-July. The broader Topix advanced 0.41% to end at 2,026.97.
The dollar hit a one-month high against the yen, as resilience in core US retail sales and impressive Wall Street bank earnings raised market expectations for an interest rate hike from the US Federal Reserve in May.
The S&P 500 banking sector jumped 3.5%, as a series of major US banks, such as Citigroup Inc and JPMorgan Chase & Co beat earnings expectations.
Shanghai stocks rose to a nine-month high, as China’s March home price data and signs of corporate earnings recovery fuelled optimism ahead of the release of first-quarter economy data. Hong Kong shares also gained.
More than 300 China-listed companies have published, or forecast first-quarter results, 70% of which have reported year-on-year profit increases, official Securities News reported.
Underscoring consumption recovery, restaurant operator China Quanjude Group reported a 49% jump in sales during the January-March period, and turned to a profit.
China Property Prices Recover
And a Reuters poll showed that China’s gross domestic product (GDP), data for which will be published on Tuesday, likely grew 4.0% in the first quarter from a year earlier, from 2.9% in the previous three months. That would be the fastest growth since the first quarter of last year.
Also, China’s new property prices rose in March at the fastest pace in 21 months, official data showed on Saturday.
The Shanghai Composite Index rallied 1.42%, or 47.46 points, to 3,385.61, while the Shenzhen Composite Index on China’s second exchange was up 0.20%, or 4.34 points, to 2,141.40.
The Hang Seng Index gained 1.68%, or 343.64 points, to 20,782.45.
There were also advances in Sydney, Singapore, Seoul, Taipei, Manila, Bangkok and Wellington. Indian stocks fell, though, with Mumbai’s signature Nifty 50 index down 0.68%, or 121.15 points, to 17,706.85.
Resilient US Retail Sales
Globally, markets have seen a mood shift on the outlook for US interest rates, with CME futures implying an 81% chance the Federal Reserve will hike by a quarter point to 5.0-5.25% in May.
Resilience in core US retail sales and a jump in inflation expectations reported on Friday have led investors to trim the amount of easing expected later this year to around 55 basis points (bp).
“Early April data on the labour market, inflation and consumption all indicate the Fed has more work to do and that a soft or bumpy landing is a greater probability than a sharp and relatively sudden contraction in activity,” said analysts at ANZ in a note.
At least eight top Fed officials are speaking this week, including three governors, and could generate plenty of headlines to move the dial further.
EUROSTOXX 50 futures and FTSE futures both edged up 0.2%. S&P 500 futures inched up 0.2%, while Nasdaq futures were flat as investors awaited a slew of earnings reports led by Goldman Sachs, Morgan Stanley and Bank of America.
Other big names reporting earnings include Johnson & Johnson, Netflix and Tesla.
Oil Prices Steady
In bond markets, the shift in Fed expectations pushed US two-year yields up to 4.12%, having risen 12 basis points last week.
The Bank of Japan remaining committed to its super-easy monetary policy, at least for now, kept the dollar firm at 134.13 yen, after rallying 1.2% last week.
The bounce in the dollar took some of the shine off gold which was back at $2,004 an ounce, off last week’s peak above $2,048.
Oil prices have enjoyed four straight weeks of gains, helped by cuts to output and as the West’s energy watchdog said global demand will climb to a record this year on the back of a recovery in Chinese consumption.
The market was consolidating on Monday with Brent down 3 cents at $86.28 a barrel, while US crude dipped 5 cents to $82.47.
Key figures
Tokyo – Nikkei 225 > UP 0.08% at 28,514.78 (close)
Hong Kong – Hang Seng Index > UP 1.68% at 20,782.45 (close)
Shanghai – Composite > UP 1.42% at 3,385.61 (close)
London – FTSE 100 > UP 0.42% at 7,905.12 (0933 GMT)
New York – Dow < DOWN 0.42% at 33,886.47 (Friday close)
- Reuters with additional editing by Sean O’Meara
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