Stocks Rise, Dollar Dips on Hopes for Fed Easing: Markets Wrap

(Bloomberg) — Asian stocks rose while the dollar fell on expectations of a rate cut from the Federal Reserve this year, and U.S. inflation data due this week are likely to indicate an easing of price pressure.

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Stock markets in Hong Kong, China, Australia, South Korea and Japan rose on Monday, while US stock futures were little changed. The Australian dollar, euro and yen strengthened somewhat against the US dollar, with Bank of Japan Deputy Governor Shinichi Uchida saying the end of the battle with deflation is on the horizon.

Global investors are hoping that the Federal Reserve, along with the European Central Bank and its peers, will cut interest rates this year. This, coupled with strong corporate earnings and signals from US officials that further interest rate hikes are unlikely, has boosted investor sentiment.

“Markets continue to strengthen as global investors continue to discern signs of US economic health and the Fed's reasonable monetary path,” said Edward Ng, senior portfolio manager at Nikko Asset Management Asia Ltd. “Investors will look to Friday's US PCE print as a possible sign.” For more market trends.

A range of inflation is set to be recorded from Australia to Japan, the Eurozone and the United States this week, as traders bet on the outlook for monetary policy. The Fed's preferred measure of core inflation is due on Friday and is expected to show modest relief.

The European Central Bank is widely expected to cut interest rates for the first time since concluding an unprecedented tightening campaign at its June meeting. But US officials are pivoting at a slower pace, with Federal Reserve Chairman Jerome Powell stressing the need for more evidence that inflation is on a sustainable path toward its 2% target before cutting the policy benchmark.

US central bankers scheduled to speak include John Williams, Lisa Cook, Neel Kashkari and Lori Logan.

“Risk sentiment is optimistic after inflation expectations eased” thanks to the US data, said Charu Chanana of Saxo Capital Markets.

Read more: About the 'T+1' rule that makes US stocks flat in one day: QuickTake

Trading in cash Treasuries was closed. British and American markets are closed on Monday for the holidays. This means that the “T+1” rule that has the potential to cause problems for foreign investors will come into effect when traders return from the long weekend – making US stocks settle in one day instead of two.

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Profits at Chinese industrial companies rose in April, data showed on Monday, helping lift sentiment, as the government's push to modernize equipment boosted demand and exports returned to growth. This is likely to be a cyclical global boom in technology products such as chips as well as a push by the Chinese government to get companies to replace their aging equipment.

Meanwhile, gold rose. This year has seen a continuing series of sharp rises in commodity prices thanks to supply constraints, high demand, and even some speculative activity.

Oil rose after its biggest weekly loss in four weeks, with the focus on the Organization of the Petroleum Exporting Countries and its partners, who are scheduled to meet online on June 2 to discuss supply cuts.

Some key events this week:

• European Central Bank Governor Philip Lane speaks in Dublin about inflation on Monday

• The International Monetary Fund is holding discussions with Ukrainian authorities to review economic policies as the country seeks to release the next batch of $2.2 billion in aid, on Monday.

• Cleveland Fed President Loretta Mester speaks at a Bank of Japan event in Tokyo. Minneapolis Fed President Neel Kashkari and ECB Governing Council member Klaas Knott address the Barclays-CEPR International Monetary Policy Forum, Tuesday.

• The presidential elections in South Africa are the most important since the end of apartheid, Wednesday

• The Fed will release its “Beige Book” economic survey on Wednesday

• South Africa Interest Rate Decision, US Initial Jobless Claims, GDP, Wholesale Inventories, Thursday

• New York Fed President John Williams speaks at the Economic Club of New York on Thursday

• GDP data for Canada, the Eurozone and Turkey were published on Friday

• Unemployment in Japan, CPI in Tokyo, industrial production, retail sales, Friday

Some key movements in the markets:

Stores

• S&P 500 futures were little changed as of 12:22 p.m. Tokyo time

• Nikkei 225 futures rose 0.3%.

• Japan's Topix index rose 0.3%.

• Australia's S&P/ASX 200 rose 0.7%.

• The Hang Seng Index in Hong Kong rose 0.4%.

• The Shanghai Composite Index rose 0.3%.

• Euro Stoxx 50 futures fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• There was little change in the euro at $1.0850

• The Japanese yen rose 0.1 percent to 156.76 yen to the dollar

• There was little change in the yuan in external transactions at 7.2572 to the dollar

Digital currencies

• Bitcoin rose 0.5% to $69,016.01

• Ethereum rose 1.7% to $3,924.89

Bonds

Goods

• West Texas Intermediate crude rose 0.3 percent to $77.97 a barrel

• Spot gold rose 0.5 percent to $2,344.94 an ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Matthew Burgess.

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