Most Asian stock markets extended gains on Tuesday on the back of renewed bets for US rate cuts after last week’s cooler-than-expected jobs data. South Korean shares jumped by 2.2%.
Meanwhile, the region’s currencies were subdued as the dollar ticked slightly higher.
Asian stocks rose further on optimism from the Federal Reserve hinting at a dovish bias after last week’s slower-than-expected job growth, which reinforced bets on rate cuts later in the year. Interest rates markets price in at least one US rate cut this year, in November.
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MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2%. South Korean stocks surged as much as 2.2% after returning from a holiday on Monday, tracking Wall Street gains overnight.
In Japan, the Nikkei rose by 1.57%, while in China, the Shanghai Composite was up 0.22%, while the Hang Seng fell by 0.5%.
In Hong Kong, the best stock performance in six years – rising for 10 consecutive trading days – came to an end when traders cashed in, despite robust tourism data for the Labour Day break and further measures on the mainland to lift the troubled property sector.
In Singapore stocks rose as much as 0.3%, while Malaysian shares gained 0.8%, touching a fresh two-year high. Investors now await Malaysia’s key rate decision on Thursday.
Stocks in Taiwan rose as much as 0.8%, while Thailand shares reached their highest level in four weeks with a 1.1% jump.
Philippine stocks were 0.2% lower, while stocks in Indonesia edged 0.1% lower after rising as much as 0.3% in early trade.
Forex news
Meanwhile, in foreign exchange dealings, the yen weakened 0.4%, after officials warned of action over rapid currency moves, and last week’s gains on suspected intervention from Japanese authorities to stop a sharp slide in the currency.
The weaker yen and small dip in the Australian dollar kept the US dollar steady. The dollar rose 0.6% on the yen on Monday and a further 0.3% to 154.31 yen on Tuesday, keeping markets on edge as to whether Japanese authorities may step in again.
Traders estimate Japan spent almost $60 billion defending the yen last week.
Australia’s central bank left interest rates on hold, as expected, but the Aussie dollar slipped about 0.4% to $0.6599 after policymakers did not strengthen guidance around the risk of another rate hike.
In South Korea, FX reserves logged the biggest monthly drop in 19 months on intervention.
In Indonesia, the rupiah fell 0.2%, losing the ground it gained on Monday after data showed the country’s economy in the January-March period grew at its fastest pace in three quarters.
The Philippine peso inched 0.1% lower after country’s annual inflation increased for a third straight month in April, backing the central bank’s recent decisions to keep monetary policy restrictive.
Regional markets are still cautious about the future path of US interest rates as they have not seen a strengthening in Asian currencies even with US yields falling, said Lloyd Chan, senior currency analyst at MUFG Bank.
“The dollar is still attractive. It has a relatively higher carry compared to many Asian currencies, and the rate differentials is in favour of the US and continues to weigh on the (regional) currencies,” Chan said.
Thailand’s baht and the Taiwanese dollar each fell by 0.2%. Taiwan is scheduled to report its April inflation numbers later on Tuesday. Bucking the regional trend, the South Korean won was 0.2% higher.
Financials and autos drag Indian stocks
In later news, Indian shares ended lower, led by losses in heavyweight financials and auto stocks, with volatility rising to a 15-month high amid the ongoing national elections.
The blue-chip Nifty 50 was down 0.62% at 22,302.50 points, while the S&P BSE Sensex shed 0.52% to 73,511.85.
The Nifty Volatility Index, a gauge for domestic market volatility, rose for the ninth consecutive session to close at 17.01, a 15-month high.
Volatility in India will continue to be elevated as uncertainty over election results will make sections of investors hold back or even take some money off the table, Raghvendra Nath, managing director at LadderUp Wealth Management, said.
The world’s most populous nation began voting last month, with votes set to be counted on June 4.
On Tuesday, eleven out of the 13 major sectoral indexes declined, with heavyweight financials and auto stocks closing down 0.9% and 1.8%, respectively.
The index extended declines for the fourth straight session and has lost about 6% since the guidelines were announced on Friday.
Global shares at one-month high
Global shares traded around one-month highs on Tuesday, boosted by renewed confidence in US interest rate cuts.
On Tuesday, US futures pointed to a steady start later on, while stocks in Europe caught a bid from the banks, where UBS and Unicredit beat expectations, sending the STOXX 600 up 0.6%.
MSCI’s All-World index was up 0.1%, around its highest since April 10.
Futures show traders believe US rates will drop by around 45 basis points this year, from 5.25-5.50% right now. This time last week, just 28 bps were priced in.
The mood set by last week’s softer-than-expected US jobs data was further underpinned by remarks from Federal Reserve chair Jerome Powell reiterating that the next move in rates will be lower.
Treasuries, which rallied on Friday’s jobs figures, traded steady in New York overnight and 10-year yields held at 4.49% in Tokyo on Tuesday. Interest rates markets price at least one US rate cut this year, in November.
Sterling eased 0.2% to $1.254, while the euro was 0.1% lower at $1.07628.
In commodities, oil held steady, with Brent crude futures up 0.1% to $83.41 a barrel with a ceasefire deal in the Middle East proving elusive.
Gold edged down 0.2% to $2.319 an ounce, still within sight of recent record highs.
- Reuters with additional editing by Jim Pollard
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