Sydney, Jan. 30 (BNA): Asian stocks turned cautious on Monday ahead of a week that is sure to see interest rates rise in Europe and the United States, along with US jobs and wages data that could influence how long they last. Togo.
Gains from the tech giants will also test the mettle of Wall Street bulls, who are looking to propel the Nasdaq to its best January since 2001, Reuters reports.
Asia was no slouch either as China’s rapid reopening boosts the economic outlook. MSCI’s broadest index of Asia-Pacific stocks outside Japan is up 11% in January so far at a nine-month high.
The index fell 0.2 percent on Monday, with markets mixed across the region. Japan’s Nikkei was flat, while Taiwan’s index jumped 3.1%.
The Nikkei reported that Renault will reduce its stake in Nissan to 15%, while the latter will invest in Renault’s electric business.
Chinese blue chips rose 1.1% after returning from vacation. Beijing reported that Lunar New Year travel within China was up 74% from a year ago, although this is still half of pre-pandemic levels.
S&P 500 and Nasdaq futures were down 0.3%, while EUROSTOXX 50 futures and FTSE futures were down 0.2%.
Investors are confident that the Federal Reserve will raise interest rates by 25 basis points on Wednesday, followed the next day by a half-point hike from the Bank of England and the European Central Bank, and any deviation from this scenario would be a real shock.
Equally important will be guidance on future policy as analysts expect that the upbeat inflation message has yet to be overcome and more work needs to be done.
“With US labor markets continuing to tighten, core inflation rising, and financial conditions easing, Fed Chair Powell’s tone will be hawkish,” said Bruce Kasman, chief economist at the Fed, stressing that a shift to a 25 basis point increase does not mean there is a Next pause. JPMorgan, which expects another hike in March.
“We also look forward to him continuing to resist market pricing in interest rate cuts later this year,” he added.
There’s a lot of lobbying to do given that futures prices currently peaked at 5.0% in March, only to fall back to 4.5% by the end of the year.
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10-year bond yields are down 33 basis points so far this month to 3.50%, essentially easing financial conditions even as the Fed’s stern tightening talks.
This pessimistic view will also be tested by US payroll data, Employment Cost Index and several ISM surveys.
Figures on EU inflation could be important as to whether the ECB signals a half-point rate hike for March, or opens the door for a slowdown in the pace of tightening.
As for the recent rally on Wall Street, a lot will depend on earnings from Apple, Amazon, Alphabet, and Meta Platforms, among many others.
“Apple will provide a glimpse into the overall consumer demand story globally, and a snapshot of supply chain issues in China will slowly begin to ease,” analysts at Wedbush wrote.
They added, “Based on our recent examinations of the supply chain in Asia, we believe demand for iPhone 14 Pro is holding up more strongly than expected.” “Apple will probably cut some costs, but we don’t expect mass layoffs.”
Market pricing of early federal easing has weighed on the greenback, which has lost 1.6% so far this month to stand at 101,790 against a basket of major currencies.
The euro rose 1.5% for the month of January at $1.0878, close to a nine-month high. The dollar even lost 1.3% against the yen to 129.27 despite the Bank of Japan’s relentless defense of its ultra-easy policies.
The dollar’s decline and yields have been a boon for gold, which is up 5.8% for the month so far at $1,930 an ounce.
China’s rapid reopening is seen as a windfall for commodities in general, supporting everything from copper to iron ore to oil prices.
The oil market was hesitant on Monday, with Brent crude falling 11 cents to $86.55 a barrel, while US crude shedding 3 cents to $79.65.