(Bloomberg) — Asian markets saw a second consecutive session of gains as attention turned towards crucial US data releases this week to gain further insights into the state of the world’s largest economy.
Stocks in the region rose on Monday, following a 1.5% increase on Friday. Australian and South Korean benchmarks advanced, while Taiwan Semiconductor Manufacturing Co.’s strong revenue performance boosted the index in Taipei. Hong Kong stocks remained relatively stable, while Chinese mainland stocks experienced fluctuations. Japanese markets were closed for a holiday.
After a tumultuous start to the week due to concerns that the Federal Reserve may delay interest rate cuts, a sense of calm has returned. The Cboe Volatility Index, also known as Wall Street’s fear gauge, has pulled back from its highest levels since the early days of the Covid-19 pandemic. The yen weakened against the US dollar on Monday.
“The skies are not completely clear yet, but there are several reasons to believe that smoother waters lie ahead,” analysts at Nomura Holdings Inc. noted, pointing to reduced concerns about a US recession and lower likelihood of an overly hawkish Bank of Japan as reasons for optimism.
In other parts of Asia, investors will closely monitor China’s retail sales and industrial production data this week to assess the nation’s economic trajectory.
China continues to grapple with bond market speculators, with state banks selling debt to support yields. Yields on the country’s 10-year benchmark bond were on track for their largest one-day increase since February. The People’s Bank of China warned in a quarterly monetary policy report released on Friday about the risks associated with wealth management products based on bonds.
New Zealand’s central bank is set to announce its policy decision this week, with signs pointing to the country possibly entering its third recession in less than two years. Australian and New Zealand government bonds saw minimal movement on Monday. Trading in Treasuries was closed in Asia due to the holiday in Tokyo.
Last week, the yen surged as traders unwound bearish positions following the BOJ’s rate hike, triggering a chain reaction as investors exited carry trades, leading to market-wide repercussions before stabilizing towards the end of the week. A former board member suggested that the central bank is unlikely to raise rates again this year, given the turbulence that ensued following its recent hike.
The BOJ and the Fed remain the primary factors influencing trading, according to Taosha Wang, a portfolio manager at Fil Asia Holdings Pte Ltd. Wang noted that there is still uncertainty in the US market regarding the possibility of a recession, which she believes is exaggerated, or a soft landing.
Global bond markets experienced a volatile week but began to settle on Friday as concerns about a potential US economic downturn eased, following a rally in Treasuries and a brief market disruption.
On Wednesday, the US consumer price index is expected to show a 0.2% increase from June for both the headline figure and the core gauge, which excludes food and energy prices. However, these modest movements may not be sufficient to deter the Fed from an anticipated interest rate cut next month.
Over the weekend, Fed Governor Michelle Bowman expressed optimism about inflation and the labor market, indicating that she may not be inclined to support an interest rate cut at the Fed’s upcoming meeting in September. Money markets have already priced in a rate cut next month and anticipate further easing throughout the year, based on swaps data compiled by Bloomberg.
In the commodities market, oil prices rose on Monday, extending gains from the previous week. Concerns about a global crude oil oversupply were exacerbated by reports of major US oil refiners scaling back operations, contributing to the uptick in prices. Gold prices, however, experienced a decline.
Key events to watch this week include:
- India CPI and industrial production on Monday
- Australia consumer confidence on Tuesday
- Japan PPI on Tuesday
- South Africa unemployment on Tuesday
- UK jobless claims and unemployment on Tuesday
- Home Depot earnings on Tuesday
- US PPI on Tuesday
- Atlanta Fed President Raphael Bostic speech on Tuesday
- Eurozone GDP and industrial production on Wednesday
- New Zealand rate decision on Wednesday
- South Korea jobless rate on Wednesday
- Poland CPI on Wednesday
- UK CPI on Wednesday
- US CPI on Wednesday
- Australia unemployment on Thursday
- Japan GDP and industrial production on Thursday
- Philippines rate decision on Thursday
- China home prices, retail sales, and industrial production on Thursday
- Norway rate decision on Thursday
- UK industrial production and GDP on Thursday
- US initial jobless claims, retail sales, and industrial production on Thursday
- St. Louis Fed President Alberto Musalem and Philadelphia Fed President Patrick Harker speeches on Thursday
- Alibaba Group and Walmart earnings on Thursday
- Hong Kong jobless rate and GDP on Friday
- Taiwan GDP on Friday
- US housing starts and University of Michigan consumer sentiment on Friday
- Chicago Fed President Austan Goolsbee speech on Friday
Market Highlights:
Stocks
- S&P 500 futures remained steady as of 12:45 p.m. Tokyo time
- Nikkei 225 futures (OSE) rose 0.7%
- Australia’s S&P/ASX 200 rose 0.5%
- Hong Kong’s Hang Seng remained stable
- The Shanghai Composite was unchanged
- Euro Stoxx 50 futures increased by 0.6%
Currencies
- The Bloomberg Dollar Spot Index showed minimal change
- The euro was steady at $1.0915
- The Japanese yen weakened by 0.3% to 147.06 per dollar
- The offshore yuan declined by 0.1% to 7.1832 per dollar
- The Australian dollar rose by 0.1% to $0.6585
Cryptocurrencies
- Bitcoin remained stable at $58,527.48
- Ether fell by 0.6% to $2,541.2
Bonds
Commodities
- West Texas Intermediate crude rose by 0.3% to $77.04 a barrel
- Spot gold fell by 0.2% to $2,427.25 an ounce
This article was created with the assistance of Bloomberg Automation.
–Assistance provided by Richard Henderson.
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