Asia Stocks Eye Early Gains Into China Policy Week: Markets Wrap

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(Bloomberg) — Asian stocks are poised for early gains Monday, tracking US shares higher into a week that includes Federal Reserve boss Jerome Powell’s congressional testimony and China’s National People’s Congress.

Australian shares were steady while equity futures in Japan, Hong Kong and mainland China were all up. US futures contracts were little changed in Asia after the S&P 500 hit yet another fresh record Friday. The yield on policy sensitive two-year Treasuries fell nine basis points to 4.53% following weaker than expected activity data and cautious comments from Fed officials. 

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Oil rose in early Asia trading after OPEC+ extended its 2 million barrels of oil a day supply cutbacks to the middle of the year, in a bid to avert a global surplus and shore up prices. US crude traded just above $80 a barrel in Asia, holding the level it hit for the first time in almost four months on Friday.

The rally in markets will likely hinge on US jobs data and Powell’s testimony this week as bets for the start of the Fed’s easing cycle were refined amid recent data indicating a resilient US economy. Swaps traders now see the first cut in July, compared with the May estimate they were pricing at the beginning of last month, according to data compiled by Bloomberg. 

“We don’t expect the chair to stray very far from the Fed’s recent messaging — officials are in a “wait-and-see” mode as there’s still a lot of ambiguity in the data,” John Briggs, global head of desk strategy at NatWest Markets wrote in a note. Government bond yields “have pushed toward their highs of recent ranges, and we think further large corrections towards higher yields is a lot less likely from here.”

The stock rally is showing little signs of slowing as US corporate earnings grew nearly 8% in the fourth quarter, helping offset macroeconomic uncertainty. Meantime, the frenzy around artificial-intelligence has blindsided Wall Street forecasters, spurring a race among strategists to keep up with a stock market rally that’s already blowing past their expectations when 2024 began. 

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Bank of America ratcheted up its forecast for the S&P 500 to 5,400 by year-end amid a surprising profit margin resilience, Savita Subramanian wrote in a note to clients.  

In Asia, Chinese equities and the yuan will be in focus ahead of the 14th National People’s Congress, an annual parliamentary gathering in Beijing, as markets await more stimulus measures to aid a soft economy. A cut to key mortgage rates and encouraging state funds to buy shares have done little to spur confidence as policy makers battle a property crisis, stubborn deflation and angry retail investors caught in a $7 trillion stock rout.

Read More: Xi’s One-Man Rule Over China’s Economy Is Spurring Unrest

Elsewhere this week, traders will be keeping an eye on Tokyo inflation, Australian growth data and a policy decision from the European Central Bank. The so-called Super Tuesday Republican and Democratic party primary votes, US jobs data and earnings from US consumer discretionary stocks are also due. 

“The strength of the consumer is a key factor that helped avoid a recession that looked likely,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. 

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Key events this week: 

• Japan capital spending, Monday
• ECB Governing Council member Robert Holzmann speaks, Monday
• Tokyo CPI, Tuesday
• China Caixin services PMI, Tuesday
• China kicks off its 14th National People’s Congress, Tuesday
• Eurozone S&P Global Services PMI, PPI, Tuesday
• More than a dozen US states hold Republican and Democratic primaries, Tuesday
• Australia GDP, Wednesday
• UK Chancellor Jeremy Hunt unveils annual budget, Wednesday
• Eurozone retail sales, Wednesday
• Fed Chair Jerome Powell testifies before House committee, Wednesday
• Canada rate decision, Wednesday
• China trade, forex reserves, Thursday
• BOJ board member Junko Nakagawa speaks, Thursday
• ECB rate decision, Thursday
• Fed Chair Jerome Powell testifies before Senate committee, Thursday
• Eurozone GDP, Friday
• US nonfarm payrolls, unemployment, Friday

Key moves in markets:  

Stocks

• S&P 500 futures were little changed as of 8:11 a.m. Tokyo time
• Australia’s S&P/ASX 200 was little changed
• Hang Seng futures rose 0.2%
• Nikkei 225 futures rose 0.5%

Currencies

• The euro was little changed at $1.0843
• The Japanese yen was unchanged at 150.12 per dollar
• The offshore yuan was little changed at 7.2097 per dollar
• The Australian dollar was little changed at $0.6529

Bonds

• Australia’s 10-year yield declined four basis points to 4.10%

Cryptocurrencies

• Bitcoin was little changed at $62,807.27
• Ether fell 0.2% to $3,470.8

Commodities

• West Texas Intermediate crude was little changed
• Spot gold rose 0.1% to $2,085.24 an ounce

This story was produced with the assistance of Bloomberg Automation.

—With assistance from Jessica Menton.

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