SYDNEY, Nov 6 (Reuters) – Asian shares rose for a fourth straight day on Monday as markets priced in early interest rate cuts in the United States and Europe, bullishness tested by a slew of central bank speakers this week. It became a gamble.
Good U.S. jobs and upbeat productivity data suggest the labor market has cooled enough to avoid the need for further interest rate hikes by the Federal Reserve, and the battered bond market has also made a welcome recovery. Ta.
“The better-than-expected U.S. supply-side performance this year is raising hopes for a soft landing,” said Bruce Kasman, head of economic research at JPMorgan.
He added: “Facilitating the elimination of inflation could lead to significant increases in productivity and labor supply, making it possible to achieve both employment growth and low inflation.” “This, in turn, could pave the way for early Fed easing.”
Futures markets have swung to suggest there is a 90% chance the Fed will complete its rate hike and an 86% chance of first policy easing as early as June.
Markets also suggest there is around an 80% chance that the European Central Bank will cut interest rates by April, with the Bank of England expected to ease in August.
At least nine Fed officials, including Chairman Jerome Powell, will speak this week, giving central bankers a unique chance to weigh in on the dovish outlook. The document also includes speakers from the BoE and ECB.
The odd man out is Australia’s central bank, which is thought to be likely to resume rate hikes at Tuesday’s policy meeting as inflation remains high.
The Bank of Japan is also moving towards tightening, albeit at a glacial pace. The central bank’s governor said on Monday that the country is close to achieving its inflation target, but not far enough to end ultra-easy policy.
Elsewhere, MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 1.7% on expectations for lower borrowing costs, having already risen 2.8% in the past week and a year earlier. It has broken out from its lowest price.
Japan’s Nikkei Stock Average (.N225) rose another 2.5% after rising 3.1% last week, while South Korea (.KS11) rose 3.9% after authorities reimposed a ban on short selling until mid-2024. .
China’s blue chip stocks (.CSI300) rose 0.8% ahead of trade and inflation data to be released later this week.
S&P 500 futures and Nasdaq futures were both flat. Eurostoxx 50 futures were also little changed, with FTSE futures up 0.1%.
bond relief
The two-year Treasury yield paused at 4.86% after dropping 17 basis points last week. The yield on the 10-year Treasury note stood at 4.587%, a far cry from October’s painful peak of 5.021%.
Analysts at NatWest Markets said in a note: “Our view remains that rate cuts by the Fed, ECB and BoE will come a bit sooner than markets are pricing in, and will be bolder in size in the early stages. “This is highly likely,” he said in the note. .
“We expect the federal funds rate to fall to 3% to 3.25%, the ECB deposit rate to 3% and the BoE to 4.25% by the end of 2024.”
The fall in U.S. Treasury yields has lifted the dollar’s weakness, which had fallen 1.3% last week and was pegged at $105.080, its lowest level since late September.
The euro was firm on Friday at $1.0728, up 1% to a two-month high. The dollar weakened further due to the weaker yen, hitting 149.52, a far cry from its recent high of 151.74.
The decline in the dollar and yields has pushed gold to $1,991, well within reach of its recent five-month high of $2,009.
Oil prices rose slightly after falling 6% last week after it was confirmed that Saudi Arabia and Russia would continue with further voluntary production cuts.
In the Middle East, Israel on Sunday rejected growing calls for a ceasefire in the Gaza Strip, and military experts said the military was poised to step up operations against the Palestinian Islamist group Hamas.
Brent crude rose 43 cents to $85.32 a barrel, and U.S. crude rose 54 cents to $81.05 a barrel.
Report by Wayne Cole.Editing: Sam Holmes
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