(Bloomberg) — Shares broadly rose on Monday, extending gains from last week, as optimism grew that interest rates are nearing their peak. The weakening of the dollar also contributed to the positive market sentiment.
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MSCI’s benchmark Asian equity index climbed for a fourth consecutive day, heading towards its highest close since September. South Korea’s Kospi jumped by as much as 4.4% following the announcement that short selling would be banned in the country until the end of June. Chinese technology and property developers also experienced gains.
US equity futures edged higher on Monday after the S&P 500 rallied almost 6% last week. European equity futures remained relatively stable, holding onto the gains from the previous week when the Euro Stoxx 50 index rose the most it has since March.
The dollar fell against most of its Group-of-10 peers, with Bloomberg’s gauge of the US currency slipping for a fourth session. Policy-sensitive US two-year yields slightly increased by two basis points after a 15 basis point decline on Friday, indicating a shift in rate expectations.
Investors have adjusted their forecasts for future Fed rate cuts and have now fully priced in a reduction by June, as shown in swaps pricing. The increase in dovish bets can be attributed in part to Friday’s weaker-than-expected US payrolls report and a slight rise in unemployment.
“There’s a bit more reason for investors to be more optimistic that the Fed is probably done with rate hikes, but one should not let one’s guard down,” said Vasu Menon, managing director for investment strategy for OCBC Bank Singapore, in an interview with Bloomberg Television. “If the economy proves to be more resilient, if inflation proves to be more stubborn, bond yields could go up once again.”
Forecasts for Fed easing next year contradict the so-called higher-for-longer narrative that policymakers have recently outlined, setting the market and Fed officials on a potential collision course.
“We believe that the stock market’s correction is over and that the S&P 500 is back on track to end the year at 4,600,” wrote Ed Yardeni, founder of Yardeni Research Inc., in a note. He added that reaching such a level would imply a 5.5% gain by the close of 2023.
Bank of Japan Governor Kazuo Ueda stated on Monday that the central bank is gradually making progress toward its inflation target, indicating a mostly dovish policy message. Indonesia’s economy grew less than expected in the third quarter.
Economists predict that the Reserve Bank of Australia will raise rates on Tuesday, ending a four-meeting pause. China will release trade data following comments from Li Qiang, the Chinese premier, who pledged to expand imports in his comments on Sunday.
In commodities, oil prices rose after Saudi Arabia and Russia reaffirmed their commitment to supply curbs of more than 1 million barrels per day through the end of the year. Gold prices dipped slightly after rallying on Friday due to optimism that the Fed will not implement further monetary tightening.
Key events to watch this week:
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Eurozone services PMI on Monday
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Australia interest rate decision on Tuesday
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China trade data on Tuesday
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US trade balance on Tuesday
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Speech by Dallas Fed President Lorie Logan on Tuesday
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Germany CPI on Wednesday
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Speech by Bank of England Governor Andrew Bailey on Wednesday
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China PPI and CPI on Thursday
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US initial jobless claims on Thursday
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Speech by Fed Chair Jerome Powell on Thursday
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US consumer confidence on Friday
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UK industrial production and GDP on Friday
Some major market movements include:
Stocks:
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S&P 500 futures remained relatively stable as of 3:09 p.m. Tokyo time, following a 0.9% increase on Friday
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Nasdaq 100 futures remained relatively stable. The Nasdaq 100 rose 1.2%
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Australia’s S&P/ASX 200 rose by 0.3%
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Japan’s Topix rose by 1.6%
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Hong Kong’s Hang Seng rose by 1.5%
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The Shanghai Composite rose by 0.8%
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Euro Stoxx 50 futures remained relatively stable
Currencies:
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The Bloomberg Dollar Spot Index fell by 0.2%
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The euro remained relatively stable at $1.0738
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The Japanese yen remained relatively stable at 149.47 per dollar
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The offshore yuan remained relatively stable at 7.2857 per dollar
Cryptocurrencies:
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Bitcoin rose by 0.5% to $34,848.21
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Ether rose by 0.4% to $1,876.62
Bonds:
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The yield on 10-year Treasuries advanced by one basis point to 4.58%
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Japan’s 10-year yield declined by five basis points to 0.870%
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Australia’s 10-year yield remained relatively stable at 4.72%
Commodities:
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West Texas Intermediate crude rose by 0.6% to $80.96 a barrel
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Spot gold fell by 0.4% to $1,985.04 an ounce
This story was produced with the assistance of Bloomberg Automation.
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