Stocks Gain Led by Japan on BOJ Rate Hike Momentum: Markets Wrap – Yahoo Finance

March 17, 2024

(Bloomberg) — Asian stocks rose led by Japanese shares, entering a week that includes policy decisions from the Bank of Japan and the Federal Reserve that are likely to determine the near-term direction of global markets.

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The MSCI Asia Pacific Index rose in Asian trading, supported by gains in Japan amid a slight weakness in the yen. The Nikkei Stock Average, which is dominated by high-tech stocks, recorded the largest increase in the past month. Mainland Chinese stocks also rose after the release of surprisingly positive economic data. U.S. stock futures rose after the S&P 500 fell 0.7% on Friday.

Speculation is mounting that the Bank of Japan will raise its key interest rate on Tuesday after Japan’s largest trade union group announced its strongest wage deal in more than 30 years. In Asian trading, the yen fell slightly against the dollar.

“Japanese stocks are rising, driven by a weaker yen and expectations that the currency won’t rise even if the central bank raises interest rates,” said Charu Chanana, a strategist at Singapore-based Saxo Capital Markets. Stated. “Every move from the Bank of Japan seems to be priced in, and all eyes are on Nvidia and the Fed this week.”

Swap traders are pricing in about 28 basis points of interest rate hikes this year, but put the probability of a March hike at about 54%, according to data compiled by Bloomberg. Goldman Sachs expects the Bank of Japan to raise interest rates in response to reports predicting wage increases and short-term interest rates in the range of 0% to 0.1%.

Tomohiro Ota, an economist at Goldman Sachs Group, said: “These developments do not mean that the Bank of Japan needs more data to make policy changes, and it does not mean that the Bank of Japan needs more data to justify policy changes in its April quarterly economic outlook report.” This suggests there is no need to wait,” he said in the note.

Read more: Japan’s $4 trillion will stay offshore after BOJ rate hike: MLIV Pulse

In China, Contemporary Amperex Technology Co. Ltd. led the rise in stock prices, with its stock soaring more than 5% after posting a higher-than-expected full-year net profit. Elsewhere, factory production and investment in China rose more significantly than expected at the start of the year. The Chinese government has set an ambitious target for annual economic growth of around 5%, the same as the 2023 target, but could be harder to achieve as the real estate sector remains a major drag. There is sex.

However, the Commonwealth Bank of Australia said the statistics were unlikely to break the yuan out of the recent tight range that has been torn between the People’s Bank of China and the upcoming Fed policy meeting.

“A potentially hawkish FOMC meeting could put upward pressure on the dollar/offshore renminbi,” CBA strategists led by Joseph Capurso said in a note to clients this week. However, that is “likely to be limited by the People’s Bank of China’s continued support of the onshore renminbi with daily corrections.”

Wednesday’s Fed policy meeting could determine the direction of global stocks next quarter. Ahead of the blackout period, Chairman Jerome Powell suggested the central bank was close to feeling confident about cutting rates, while others debated how deep or shallow the cuts would be.

Meanwhile, bond traders appear to have painfully surrendered to the reality of long-term high levels. The policy-sensitive two-year bond yield rose 11 basis points to 4.73% this month, extending last month’s rise. Swap traders are pricing in a rate cut of about 71 basis points by the end of the year, down from 134 basis points at the beginning of the year, according to data compiled by Bloomberg.

“While the Fed may have less confidence in inflation than it has in the past, it remains confident in the disinflationary trend,” Bank of America economists including Michael Gapen wrote in a note to clients. ”, adding that the central bank is likely to maintain its median forecast of three rate cuts this year. “This may be a pipe dream on our part, but there have been some inflation reports and there is plenty of time between now and June to change course if necessary.”

Read more: Traders look to consumer stocks for clues about where the Fed will go

Elsewhere this week, the Reserve Bank of Australia is expected to extend its interest rate suspension, while Bank Indonesia and the Bank of England are also expected to make policy decisions. Eurozone inflation statistics and Reddit’s initial public offering are also scheduled.

In commodity markets, crude oil prices were firmer on Monday after posting their biggest weekly rise in a month amid heightened geopolitical risks following Ukraine’s attack on a Russian oil refinery. Gold fell slightly, with iron ore falling below $100 a tonne in Singapore, the lowest price since May last year.

This week’s main events: