Asian stocks look for early gains as interest rate cuts take hold: markets rally

(Bloomberg) — Asian shares rose in early trading as a softer reading of the Federal Reserve’s preferred measure of inflation boosted hopes for interest rate cuts.

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Stocks in Australia and Japan opened higher on Monday, with futures also pointing to gains in Hong Kong. Elections in key emerging markets will help set the tone, with Indian stocks, bonds and the rupee set to rise after exit polls indicated a resounding victory for Prime Minister Narendra Modi’s party. In Mexico, the peso traded higher while the polls were still open.

The gains in Asian shares come after rising 1.5% in May, helped by signs of stabilization in the Chinese economy and a weaker dollar. But politics could cause volatility as tensions over the Middle East and the US election heat up, AMP Ltd said.

“We continue to see further gains in equities this year as disinflation continues, central banks eventually cut rates and a recession is avoided or proves to be mild,” said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney. “But the risks of a deeper correction than April have increased.”

Oil fell in early trading after OPEC+ extended its production cuts in efforts to shore up a fragile market. While the deal exceeded market expectations, supply cuts will also be reversed in October, earlier than some OPEC observers had expected.

Follow Bloomberg’s live blog of the Mexican elections here for the latest results

The dollar was steady in early trading. Australian government bond yields fell slightly, while 10-year government bonds were little changed.

The Fed’s preferred inflation measure, the main price gauge for personal consumption spending, met expectations on Friday and posted the smallest increase this year. Inflation-adjusted consumer spending unexpectedly fell 0.1%, driven by a decline in spending on goods and softer services spending. Wage growth, the main fuel for demand, is subdued.

“While this is unlikely to be enough to justify an upcoming Fed rate cut, we believe recent data continues to support our base case for a soft landing,” wrote Solita Marcelli, chief investment officer for the Americas at UBS’ asset management division Group AG. a note. “This should allow the U.S. central bank to begin easing policy later this year, most likely at the September meeting in our view.”

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Read more: The main engines of US consumer spending are losing steam overnight

Meanwhile, Saudi Aramco’s $12 billion share sale sold out shortly after the deal opened on Sunday, a boon for the government as it seeks funds to help pay for a massive economic transformation plan. While it was not immediately clear how much of the demand came from abroad, the order book reflected a mix of local and foreign investors, people familiar with the matter told Bloomberg News.

This week, traders will be closely watching inflation figures in emerging markets including Indonesia, South Korea and Chile, as well as growth data in Australia and Europe. Data on economic activity is also expected in Europe ahead of the ECB’s interest rate decision, with the US jobs report due on Friday.

Some important events this week:

• China Caixin manufacturing PMI, Monday

• Indonesia CPI, Monday

• India S&P Global Manufacturing PMI, Monday

• S&P Global Manufacturing PMI for the Eurozone, Monday

• UK S&P Global / CIPS Manufacturing PMI, Monday

• US Construction Spending, ISM Manufacturing, Monday

• The board of the International Atomic Energy Agency will meet in Vienna on Monday

• South Korean CPI, Tuesday

• German unemployment, Tuesday

• South Africa’s GDP, Tuesday

• Brazil’s GDP, Tuesday

• US Factory Orders, JOLTS, Tuesday

• Australia’s GDP, Wednesday

• South Korea’s GDP, Wednesday

• China Caixin serves PMI, Wednesday

• Eurozone S&P Global Services PMI, PPI, Wednesday

• Tariff decision Canada, Wednesday

• Eurozone retail sales, ECB interest rate decision, Thursday

• Chinese trading, currency reserves, Friday

• Eurozone GDP, Friday

• Mexico CPI, Friday

• Chile copper exports, trade, CPI, Friday

• U.S. unemployment rate, nonfarm payrolls, wholesale inventories, Friday

Some of the major moves in the markets:

Shares

• S&P 500 futures rose 0.2% as of 9:09 a.m. Tokyo time

• Hang Seng futures rose 0.4%

• Japan’s Topix rose 1%

• Australia’s S&P/ASX 200 rose 0.8%

• Euro Stoxx 50 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0852

• The Japanese yen was little changed at 157.27 per dollar

• The offshore yuan was little changed at 7.2621 per dollar

Cryptocurrencies

• Bitcoin was little changed at $67,749.2

• Ether fell 0.2% to $3,777.22

Bonds

Raw materials

• West Texas Intermediate crude fell 0.3% to $76.78 a barrel

• Gold fell 0.1% to $2,324.93 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Matthew Burgess.

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