(Bloomberg) — Asian stocks rose as traders weighed the possibility of a Fed interest rate cut after Federal Reserve Chairman Jerome Powell said the U.S. was back on a deflationary track.
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Stock indexes in Japan, Australia and South Korea rose, while Hong Kong stock futures signaled a strong start. S&P 500 futures were down slightly after the index closed above 5,500 for the first time, its 32nd close this year, continuing a ferocious rally that has analysts scrambling to revise their targets. Tesla surged 10%, leading a rally in large stocks and helping the Nasdaq 100 close above 20,000 for the first time.
The S&P 500 and Nasdaq closing at record highs “could also be seen as another win, given the psychological significance of ‘fractions,'” said Chris Weston, head of research at Pepperstone Group in Melbourne. “Asia will also be inspired not just by the net gains and losses in the U.S. market, but also by the fact that it was a broader range of stocks and participation, rather than just tech, that powered their respective indexes.”
Elsewhere in markets, crude oil prices rose and traded near a two-month high, while the Bloomberg Dollar Spot Index was little changed. Treasury yields were flat after dropping for the first time in three sessions on Tuesday.
In Asia, traders are hoping for signs of improvement in China’s struggling housing market after China Vanke Co. Ltd.’s sales stagnated last month and Country Garden Holdings Co. Ltd.’s sales fell further.
Meanwhile, analysts say the central bank’s bond-borrowing plans may be slowing. The central bank has resisted a rally in domestic bonds for months and in May signaled it might sell some of its holdings to stem the rally.
In the United States, stock prices have continued to rise against the expectations of pessimists, driven by robust corporate earnings, an artificial intelligence boom and the prospect of lower interest rates, with the S&P 500 index increasing in value by more than $16 trillion since its closing low in October 2022. The lack of any meaningful pullback has bulls confident the rally is sustainable.
The S&P 500 will soar to new highs by the end of the year as economic strength outweighs market risks, according to Lori Calvasina of RBC Capital Markets. She raised her year-end target to 5,700 from 5,300, the highest level on Wall Street, despite the fact that the market is “getting a little ahead of itself.”
“We believe the economy will be strong enough in 2024 to justify strong performance in the S&P 500 throughout the year,” Calvasina said.
On the economic front, data on Tuesday showed an unexpected increase in job openings, interrupting a trend that highlighted a slowdown in the labor market that had been seen as key to the Fed’s monetary easing.
Powell said there has been “substantial” movement toward better balancing between labor supply and demand. He said the job market is strong but is cooling commensurately.
Wall Street is bracing for a flurry of economic data to be released on Wednesday, when markets close early for Thursday’s U.S. holiday.
And this is ahead of Friday’s all-important U.S. jobs report, which economists expect to show that employers added about 190,000 jobs in June and that the unemployment rate remained at 4%.
US Preview: Minutes reveal close margin of Fed rate cut predictions
Major events this week:
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China Caixin Services PMI, Wednesday
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Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
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Fed minutes, ADP employment, ISM services, factory orders, initial jobless claims, durable goods, Wednesday
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Fed President John Williams to speak Wednesday
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UK general election on Thursday
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US Independence Day holiday, Thursday
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Eurozone retail sales on Friday
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US jobs report, Friday
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Fed President John Williams to speak Friday
Some of the key market developments:
stock
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S&P 500 futures were little changed as of 9:16 a.m. Tokyo time.
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Hang Seng futures up 0.5%
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Japan’s TOPIX rises 0.2%
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Australia’s S&P/ASX 200 rose 0.3%
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Euro Stoxx 50 futures up 0.3%
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Nasdaq 100 futures little changed
currency
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The Bloomberg Dollar Spot Index was little changed.
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The euro was little changed at 1.0751 dollars
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The Japanese yen was almost unchanged at 161.51 yen to the dollar.
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The offshore yuan was little changed at 7.3081 per dollar.
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The Australian dollar was little changed at 0.6670
Cryptocurrency
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Bitcoin rose 0.4% to $62,139.5.
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Ether rose 0.2% to $3,420.43.
Bonds
merchandise
This story was produced with assistance from Bloomberg Automation.
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