(Bloomberg) — Asian shares tracked gains in the U.S. as lower expectations for U.S. consumer price growth strengthened the case for the Federal Reserve to cut interest rates later this year.
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Markets in Australia, South Korea and Japan posted modest gains on Monday, while Hong Kong stock futures also rose. U.S. stock contracts were little changed in early Asian trading.
The renewed optimism came after Asian stock indexes posted their worst week in more than a month amid growing concerns about whether the Fed will cut interest rates this year, as well as doubts about the implementation and effectiveness of China’s property rescue package.
“Asian bourses should start off reasonably well given the recovery in the U.S. market. Risk sentiment is pretty good today,” said Tony Sycamore, an analyst at IG Markets in Sydney.
In Japan, the yen strengthened slightly against the dollar after Bank of Japan Governor Kazuo Ueda said Monday that the central bank’s task was to determine the neutral interest rate. The yen traded at around 157 yen to the dollar as markets priced in the possibility of another rate hike by the BOJ this year.
Wall Street took some relief after University of Michigan data showed consumers expect prices to rise at an annual rate of 3.3% over the next 12 months, down from the 3.5% expected earlier this month. Later this week, the Federal Reserve’s frontline inflation gauge, due to be released on Friday, is expected to point to some easing from stubborn upward price pressures.
Federal Reserve Chairman Jerome Powell and his colleagues have stressed that they need more evidence that inflation is sustainably moving toward their 2% target before lowering interest rates, which have been at a 20-year high since July.
The dollar edged lower in Asian markets on Monday as spot Treasury trading was closed. With U.S. markets closed on Monday, the “T+1” rule will come into effect when traders return from the holiday weekend, meaning U.S. stocks will be settled in one day instead of two.
Read more: About the “T+1” rule for US stocks to be settled on the same day: QuickTake
Among the U.S. central bank governors speaking during the holiday-shortened week are John Williams, Lisa Cook, Neel Kashkari and Laurie Logan.
This week, investors will look to China’s industrial profits and PMI data to gauge the health of the world’s second-largest economy. Inflation data from Australia, Japan and the euro zone are also due to be released, with traders keeping a close eye on the outlook for monetary policy.
“Strong euro zone data will likely keep expectations of a rate cut on June 6th intact, while rising Tokyo data will likely keep expectations for the Bank of Japan unchanged,” said Mark Chandler, chief market strategist at Bannockburn Global.
In commodity markets, crude oil steadied after a week of declines as attention shifted to an OPEC+ supply meeting on Sunday and U.S. demand as the summer driving season gets underway, while gold was little changed on Monday after its worst week since September.
Some of the key market developments:
stock
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S&P 500 futures were little changed as of 9:19 a.m. Tokyo time.
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Hang Seng futures rose 0.4%
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Japan’s TOPIX rises 0.2%
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Australia’s S&P/ASX 200 rose 0.6%
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Euro Stoxx 50 futures unchanged
currency
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The Bloomberg Dollar Spot Index was little changed.
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The euro was unchanged at $1.0847.
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The Japanese yen rose 0.1% to 156.83 yen to the dollar.
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The offshore yuan was little changed at 7.2611 per dollar.
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The Australian dollar was little changed at 0.6627
Cryptocurrency
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Bitcoin fell 0.1% to $68,580.35.
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Ether fell 0.5% to $3,839.12.
Bonds
merchandise
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West Texas Intermediate crude rose 0.2% to $77.88 a barrel.
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Spot gold rose 0.1% to $2,336.21 an ounce.
This story was produced with assistance from Bloomberg Automation.
–Matthew Burgess with assistance.
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