Stocks rise, dollar falls on hopes of Fed easing: markets align

(Bloomberg) — Asian shares rose while the dollar fell on expectations of a Federal Reserve rate cut this year, with U.S. inflation data this week likely to signal easing price pressures.

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Stock markets in Hong Kong, China, Australia, South Korea and Japan advanced Monday, while U.S. stock futures were little changed. The Australian dollar, euro and yen strengthened slightly against the greenback, with Bank of Japan Deputy Governor Shinichi Uchida saying the end to the battle against deflation was in sight.

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

“Markets continue to consolidate as global investors remain alert to signs of a healthy US economy and the Fed’s plausible monetary path,” said Edward Ng, senior portfolio manager at Nikko Asset Management Asia Ltd. signpost for further market directions.”

This week will see a series of inflationary pressures from Australia to Japan, the Eurozone and the US as traders turn their finesse to the outlook for monetary policy. The Fed’s preferred measure of underlying inflation is due Friday and is expected to show modest easing.

The ECB is widely expected to cut rates for the first time since concluding an unprecedented tightening campaign at its June meeting. But U.S. officials are moving at a slower pace toward a turnaround, with Fed Chairman Jerome Powell stressing the need for more evidence that inflation is on a sustainable path toward the 2% target before cutting the policy benchmark.

John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among the US central bankers who will speak.

“Risk sentiment is positive following softer inflation expectations” thanks to US data, said Charu Chanana of Saxo Capital Markets.

Read more: On the ‘T+1’ rule that makes US stocks settle down in a day: QuickTake

Trading in cash government bonds was closed. The British and American markets are closed on Monday for public holidays. That means the “T+1” rule, which could potentially cause problems for foreign investors, will kick in when traders return from the long weekend — causing U.S. stocks to settle in one day instead of two.

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Profits at China’s industrial companies rose in April, data showed on Monday, as government pressure to upgrade equipment boosted demand and exports returned to growth. A global cyclical boom in technology products such as chips and an attempt by the Chinese government to get companies to replace their old equipment have likely supported the rebound.

Meanwhile, gold rose. This year has seen a continued series of increases in commodity prices, driven by supply constraints, rising demand and even some speculative activity.

Oil rose after the biggest weekly loss in four countries, focusing on the Organization of the Petroleum Exporting Countries and its partners, which will meet online on June 2 to discuss supply cuts.

Some important events this week:

• Philip Lane of the ECB will speak about inflation in Dublin on Monday

• The IMF is holding talks with Ukrainian authorities to review economic policies as the country tries to release the next tranche of $2.2 billion in aid, Monday

• Cleveland Fed President Loretta Mester speaks at BOJ event in Tokyo; Minneapolis Fed President Neel Kashkari and ECB Governing Council member Klaas Knot address the Barclays-CEPR International Monetary Policy forum on Tuesday

• South African elections on Wednesday, the most important since the end of apartheid

• Fed releases the Beige Book economic survey on Wednesday

• South Africa rate decision, US initial unemployment claims, GDP, wholesale stocks, Thursday

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

• GDP data released for Canada, Eurozone and Turkey, Friday

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

Some of the major moves in the markets:

Shares

• Futures on the S&P 500 were little changed at 12:22 a.m. Tokyo time

• Nikkei 225 futures (OSE) rose 0.3%

• Japan’s Topix rose 0.3%

• Australia’s S&P/ASX 200 rose 0.7%

• Hong Kong’s Hang Seng rose 0.4%

• The Shanghai Composite rose 0.3%

• Eur Stoxx 50 futures fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0850

• The Japanese yen rose 0.1% to 156.76 per dollar

• The offshore yuan was little changed at 7.2572 per dollar

Cryptocurrencies

• Bitcoin rose 0.5% to $69,016.01

• Ether rose 1.7% to $3,924.89

Bonds

Raw materials

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

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

This story was produced with the help of Bloomberg Automation.

–With help from Matthew Burgess.

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