Asian stock markets experienced a surge on Monday, bolstered by a less intense reading of the Federal Reserve’s preferred inflation measure, which has strengthened expectations of a rate cut.
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Shares in Australia, Japan, and Hong Kong showed an upward trend. Indian stock futures saw a significant increase as exit polls predicted a sweeping win for Prime Minister Narendra Modi’s party, while stocks in mainland China experienced a decline.
The recent weakening of the dollar has supported the rise in Asian stocks, with investors anticipating a policy easing from the Federal Reserve. The greenback saw a 1.1% decline in May, marking the first monthly drop this year.
On Friday, the Fed’s favorite inflation gauge, the core personal consumption expenditures, recorded its smallest increase for the year. However, political factors could introduce volatility, as tensions persist in the Middle East and the US election scenario.
“There’s a noticeable softening of data in the US,” stated Naomi Fink, a strategist at Nikko Asset Management, during a Bloomberg Television segment. “If we can observe a steady decline in inflation, global markets are likely to see a positive impact.”
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Oil prices increased. Australian bond yields, along with those for 10-year Treasuries, experienced a slight drop.
“Although the recent data is not sufficient to warrant an immediate Fed rate cut, we believe it supports our base case for a soft economic landing,” wrote Solita Marcelli, Chief Investment Officer for the Americas at UBS Group AG’s wealth management unit. “We expect the US central bank to initiate policy easing later this year, most likely in September.”
Read More: Major Drivers of US Consumer Spending Are All Slowing Down Simultaneously
Meanwhile, the $12 billion share sale by Saudi Aramco was quickly sold out after launching on Sunday, providing a financial boost to the government’s ambitious economic transformation plan. While the exact proportion of overseas demand was not clear, both local and foreign investors contributed to the order book, sources informed Bloomberg News.
In Mexico, polls have closed and two media outlets have projected a victory for Claudia Sheinbaum, who campaigned for the ruling party Morena on a platform of continuity.
Traders will be closely monitoring inflation data in emerging markets such as Indonesia, South Korea, and Chile this week, along with growth figures in Australia and Europe. The European Central Bank may signal a potential euro depreciation on Thursday with its first interest-rate cut of the cycle. A US jobs report is due on Friday.
Key events to watch this week are:
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China Caixin manufacturing PMI, Monday
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Indonesia CPI, Monday
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India S&P Global Manufacturing PMI, Monday
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Eurozone S&P Global Manufacturing PMI, Monday
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UK S&P Global / CIPS Manufacturing PMI, Monday
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US construction spending, ISM Manufacturing, Monday
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International Atomic Energy Agency board meets in Vienna, Monday
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South Korea CPI, Tuesday
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Germany unemployment, Tuesday
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South Africa GDP, Tuesday
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Brazil GDP, Tuesday
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US factory orders, JOLTS, Tuesday
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Australia GDP, Wednesday
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South Korea GDP, Wednesday
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China Caixin services PMI, Wednesday
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Eurozone S&P Global Services PMI, PPI, Wednesday
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Canada rate decision, Wednesday
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Eurozone retail sales, ECB rate decision, Thursday
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China trade, forex reserves, Friday
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Eurozone GDP, Friday
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Mexico CPI, Friday
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Chile copper exports, trade, CPI, Friday
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US unemployment rate, nonfarm payrolls, wholesale inventories, Friday
Main market movements:
Stocks
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S&P 500 futures climbed 0.2% as of 10:31 a.m. Tokyo time
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Nikkei 225 futures (OSE) increased 1.1%
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Japan’s Topix surged 1%
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Australia’s S&P/ASX 200 climbed 0.8%
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Hong Kong’s Hang Seng surged 1.4%
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The Shanghai Composite dipped 0.2%
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Euro Stoxx 50 futures climbed 1%
Currencies
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The Bloomberg Dollar Spot Index slipped 0.1%
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The euro remained steady at $1.0855
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The Japanese yen increased 0.1% to 157.12 per dollar
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The offshore yuan remained steady at 7.2613 per dollar
Cryptocurrencies
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Bitcoin climbed 0.6% to $68,207.12
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Ether climbed 0.3% to $3,795.89
Bonds
Commodities
The creation of this story was assisted by Bloomberg Automation.
Matthew Burgess provided additional support.
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