Asia tracks another rally on Wall St as US rate optimism lingers
Last week’s US jobs data boosted hopes for a Federal Reserve interest rate cut
Hong Kong – Asian markets built on the latest global rally Tuesday as optimism that the US Federal Reserve will cut interest rates this year continued to breeze through trading floors.
Friday’s big miss on jobs creation for April, a strong earnings season and soothing comments about the policy outlook by central bank chief Jerome Powell have combined to push equities higher in recent weeks.
Positive soundings out of Beijing on help for the world’s number two economy and very low valuations after years of selling are also injecting some much-needed life into Hong Kong and mainland Chinese markets.
Investors will be keeping an eye on comments from Fed officials this week in light of the recent jobs data, which came after three months of forecast-beating inflation figures that had seen markets lower their rate cut expectations to less than two — from six at the start of the year.
The upbeat mood was ushered in by Powell’s remarks last Wednesday that he did not foresee borrowing costs going up again this year and that he still expected to cut at some point.
That tempered a lot of the volatility in markets caused by wild fluctuations in the yen at the start of last week that reportedly prompted two Japanese interventions.
“Bulls will be looking to maintain their momentum after snatching last week from the jaws of bears,” said Chris Larkin at E*Trade from Morgan Stanley.
“This week is light on high-profile economic data, but heavy on Fed members hitting the speaking circuit. Traders will be dissecting any comments they make about potential rate cuts.”
Richmond Fed chief Thomas Barkin earlier this week said: “I am optimistic that today’s restrictive level of rates can take the edge off demand in order to bring inflation back to our target.
“The full impact of higher rates is yet to come,” he said in prepared notes, according to Bloomberg News.
On Wall Street the S&P 500 and Nasdaq chalked up more than one percent in gains while the Dow was also in the green.
And Asia came largely in line.
Tokyo advanced as it reopened after a long weekend break, while Shanghai, Sydney, Singapore, Seoul, Taipei and Manila were also up.
But Hong Kong struggled to maintain momentum after ten successive gains, while Wellington and Jakarta also struggled.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.2 percent at 38,688.66 (break)
Hong Kong – Hang Seng Index: DOWN 0.4 percent at 18,499.45
Shanghai – Composite: UP 0.1 percent at 3,143.37
Dollar/yen: UP at 154.50 yen from 153.86 yen on Friday
Euro/dollar: DOWN at $1.0765 from $1.0772
Pound/dollar: DOWN at $1.2556 from $1.2564
Euro/pound: UP at 85.74 from 85.72 pence
West Texas Intermediate: UP 0.2 percent at $78.67 per barrel
Brent North Sea Crude: UP 0.2 percent at $83.46 per barrel
New York – Dow: UP 0.5 percent at 38,852.27 (close0
London – FTSE 100: Closed for a holiday