Stella Chiu
SYDNEY (Reuters) – Asian shares tracked Wall Street higher on Tuesday on hopes that U.S. Federal Reserve Chairman Powell would sound more dovish on the outlook for monetary easing later in the day, while the dollar steadied near a four-week low.
The euro regained some lost ground and French stocks were volatile, while the risk premium for French government bonds over German bunds narrowed as investors digested a shock election result that left France facing a hanging parliament.
MSCI’s broadest index of Asia-Pacific shares ex-Japan rose 0.3% on Monday, just below a two-year high, while Japan’s Nikkei rose 1% to a record high.
S&P 500 futures rose 0.2% and Nasdaq futures rose 0.3% after Wall Street stocks closed at record highs overnight. [.N]
China’s blue chip stocks rose 0.1%, while Hong Kong’s Hang Seng Index was flat.
Fed Chairman Jerome Powell is due to appear before Congress on Tuesday and Wednesday, but investors are betting that a string of weak labor market data has significantly increased the chances of a September rate cut to about 80 percent.
“I think Powell’s cautiously dovish tone has created some optimism in the market that the CPI reading later this week will confirm that disinflation is back on track,” said Shane Oliver, chief economist at AMP in Sydney.
“That seems reasonable to me. When you look at the U.S. economy, most of the data is softening. Friday’s jobs report was weak, the unemployment rate is trending up. Most of the labor market leading indicators are cooling.”
The main economic event this week is the release of the U.S. Consumer Price Index on Thursday, which is expected to show headline inflation slowing to 3.1% in June from 3.3% in May, while core inflation is expected to remain stable at 3.4%.
For 2024 as a whole, markets are fully pricing in a total of 50 basis points of easing, equivalent to two rate cuts.
In foreign exchange markets, the U.S. dollar steadied near a four-week low of 104.98 against major currencies, providing some relief to the hard-hit yen and yuan.
The Japanese yen traded at 160.84 yen to the dollar after falling to a 38-year low of 161.96 yen last week, while the offshore yuan rose for the fourth straight session to pull away from a seven-and-a-half-month low at 7.2874 yen to the dollar.
Treasury bonds were steady after finishing mixed on Monday. The 10-year Treasury yield was trading at 4.2764% after falling for four straight trading days, while the two-year note was flat at 4.6243%, near a three-month low.
In commodity markets, gold rose 0.2% to $2,363.31 an ounce after falling 1.4% overnight. [GOL/]
Oil prices were little changed after a hurricane that hit a major U.S. oil production hub in Texas caused less damage than expected. [O/R]
(Reporting by Stella Chiu and Himani Sarkar Editing by
