Asian shares surge ahead of critical US inflation data, rate cut expected | Stock Market Today

Asian shares edged higher on Monday as investors braced for a busy week of data which culminates in a key US inflation report that could set the stage for a cut in interest rates there, albeit not for a few months yet.

Holidays in the United States and UK made for thin trading ahead of Friday’s figures on core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation. Median forecasts are for a rise of 0.3 per cent in April, keeping the annual pace at 2.8 per cent, with risks on the downside.

“Consumer and producer price data suggest core PCE inflation lost further momentum in April after a strong start to the year. Indeed, we look for the core index to advance 0.22 per cent m/m vs 0.32 per cent in March and an initial 0.25 per cent estimate,” said analysts at TD Securities in a note.

“We also look for the headline to rise 0.23 per cent m/m while the super core likely cooled to 0.26 per cent.”

Figures for inflation in the euro zone are also due on Friday and an expected tick up to 2.5 per cent should not stop the European Central Bank from easing policy next week.

Policy makers Piero Cipollone and Fabio Panetta both flagged a coming cut over the weekend, while markets imply an 88 per cent chance of an easing to 3.75 per cent on June 6.

The Bank of Canada might also ease next week, while the Fed is seen waiting until September for its first move.

There are at least eight Fed officials due to speak this week, including two appearances by the influential head of the New York Fed John Williams.

The head and deputy head of the Bank of Japan speak later on Monday, along with the ECB’s chief economist. The BOJ holds its policy meeting on June 14 and there is some chance it may buck the global trend and hike rates again, albeit to a modest 0.15 per cent.

The prospect of lower borrowing costs across much of the globe has been positive for equities and commodities, though many markets did run into profit taking last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.1 per cent, having slipped 1.5 per cent last week and away from a two-year peak.

Japan’s Nikkei rose 0.3 per cent, ahead of a reading on Tokyo consumer prices later in the week.

S&P 500 futures were flat, while Nasdaq futures dipped 0.1 per cent having hit record highs last week after Nvidia beat expectations.

Indeed, Nvidia alone has accounted for a quarter of the S&P 500’s gains so far this year, while the Magnificent 7 tech darlings are up 24 per cent for the year.

In currency markets, attention was again centred on the yen and the risk of Japanese intervention ahead of the 160.00 level. The dollar stood at 156.89 yen, having added 0.9 per cent last week and close to its recent top of 160.245.

Japan renewed its push to counter excessive yen falls during a weekend gathering of Group of Seven (G7) finance leaders, after a recent rise in bond yields to a 12-year high failed to slow the currency’s decline.

The euro was steady at $1.0845, and short of its recent top at $1.0895.

Gold was holding at $2,337 an ounce, having recoiled 3.4 per cent last week and off an al-time peak of $2,449.89. [GOL/]

Oil prices were stuck near four-month lows amid concerns about demand as the US driving season gets underway this week. Investors are waiting to see if OPEC+ will debate new production cuts at an online meeting on June 2, though analysts doubt there will be a consensus for a move. [O/R]

Brent was up 5 cents at $82.17 a barrel, while US crude rose 9 cents to $77.81 per barrel.

First Published: May 27 2024 | 7:06 AM IST