Written by Lei Wee
SINGAPORE (Reuters) – Global stock markets got off to a strong start this week ahead of Nvidia's (NASDAQ:) long-awaited results, but in Japan, a speech by the central bank governor left markets wondering about the country's interest rate outlook. I took a more enlightened view.
Bank of Japan Governor Kazuo Ueda reiterated on Monday that the central bank would continue to raise interest rates if economic and price developments proceed as expected, but did not mention the possibility of a rate hike in December.
His speech was closely watched by investors for clues about the Bank of Japan's next interest rate hike, and could be seen as a way to counter the yen's weakness.
Japan's currency has fallen about 7% since October against the dollar's recovery, falling above the 156 yen level last week for the first time since July, and traders remain wary of intervention from Japanese authorities. .
The dollar was last down 0.3% to $154.72, mitigating some of the losses from Ueda's speech.
IG market analyst Tony Sycamore said the possibility of the Bank of Japan's interest rate hike next month “depends to some extent on the dollar/yen trend.”
“If the dollar/yen rises around 160, I think it increases the (likelihood of) rate hikes. But I think he probably isn't unhappy with the dollar/yen being around 150, 152. I think we're keeping them on the sidelines until next year.
“It's coming, it's just a matter of when…Japan's economy is doing well.”
Despite the weaker yen, the stock fell 0.76%, dragged down by declines in the stock prices of healthcare companies.
Meanwhile, MSCI's broadest index of Asia-Pacific stocks outside Japan rose 0.7%.
Similarly, Nasdaq futures rose 0.6% and rose 0.25%.
The highlight for investors this week will be Nvidia's third-quarter results on Wednesday, with analysts expecting the artificial intelligence chip leader to post a surge in sales.
Nvidia's stock price has risen nearly 200% this year, and the company is a large part of the index's record high this year.
But the company's torrid multi-year performance has also raised the bar for earnings above performance, and any missteps could raise concerns that market expectations for AI are outpacing reality. There is sex.
Elsewhere, Chinese stocks opened higher on Monday. The blue-chip index last gained 1.22%, while the same index rose 1.34%.
Hong Kong rose 1.5%.
Trump and interest rates
U.S. Treasury yields hovered near multi-month highs on Monday, supported by expectations that the Federal Reserve's future rate cuts will be less aggressive. [US/]
The benchmark 10-year bond yield was stable at 4.4315%, and the 2-year bond yield was last at 4.2990%.
Futures suggest a 60% chance the Fed will ease by a quarter of a point in December, with rate cuts priced in at just 77 basis points by late 2025 (up from just a few weeks ago). (more than 100 basis points).
This is due to comments made by Chairman Jerome Powell last week suggesting that borrowing costs may remain high for an extended period of time, and the policy of tariffs, immigration cuts, and debt-financed tax cuts touted by President-elect Donald Trump. This is based on the view that it will stimulate inflation. This will limit the scope for further policy relaxation.
“As changes to immigration, tariff, and fiscal policy are underway, Fed officials must consider the inflationary impact of these policies and the need to keep real policy rates higher than other policies. As a result, they will act more cautiously in any case,'' said Thierry Wismann, global currency and rates strategist at Macquarie.
At least seven Fed officials are scheduled to speak this week, and traders expect them to be cautious about cutting rates aggressively.
Changes in U.S. interest rates and the outlook for inflation pushed the dollar to new highs, along with U.S. Treasury yields.
The dollar hovered around 106.66 against a basket of currencies, its highest level in a year.
The pound last bought $1.2640, languishing near a six-month low hit last week, while the euro rose 0.03% to $1.0543.
A number of European Central Bank presidents will also speak this week, but they are likely to sound more dovish given recent weak economic data and the risk that Trump's proposed tariffs will hurt EU trade.
In commodities, oil prices were firm on Monday. Futures rose 0.18% to $71.17 per barrel, while futures were little changed at $67.05 per barrel. [O/R]
It rose 1.24% to $2,593.02 an ounce, recovering from last week's plunge. [GOL/]
