Asian stocks rise on Fed outlook as PBOC keeps interest rates unchanged: Market Wrap

(Bloomberg) — Most Asian stocks rose as traders strengthened their view that the U.S. Federal Reserve will cut interest rates this year. Chinese stocks erased earlier losses as investors ignored the central bank’s decision to keep key policy rates unchanged.

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The MSCI Asia-Pacific stock index rose for a third straight hour after Friday’s unexpected decline in U.S. producer prices, boosting expectations that the Federal Reserve will lower borrowing costs in coming months.

The People’s Bank of China unexpectedly kept the rate on a one-year policy loan known as the Medium-Term Lending Facility unchanged at 2.5%, sparking speculation that officials may lower the required reserve requirement in the coming months. China’s CSI300 index started to rise. Monday. This was contrary to expectations among economists that interest rates would be cut by 10 basis points.

“While rate cuts still appear to be on the table, China appears to be taking a more cautious approach to policy easing,” said Marvin Chen, an analyst at Bloomberg Intelligence in Hong Kong.

Shares in Baidu fell as much as 10% in Hong Kong after reports that the company’s Ernie AI platform was linked to important research into artificial intelligence for the Chinese military. The decline also caused other Hong Kong-listed tech stocks to fall.

Taiwan’s stocks rose after the Democratic Progressive Party won the presidential election and the more pro-China Nationalist Party won too few seats to control parliament. Japanese stocks rose last week as the TOPIX and Nikkei stock averages both rose to 34-year highs on the back of capital inflows from overseas investors.

U.S. stock futures were little changed in Asian markets after the S&P 500 closed marginally higher on Friday. US markets are closed on Monday due to the holiday. The dollar was mixed, but 10-year U.S. Treasury futures were little changed. Due to the US holiday, there will be no spot trading in US Treasuries.

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Swaps traders believe there is a nearly 80% chance the Fed’s easing cycle will begin in March, up from about 62% early last week, according to data compiled by Bloomberg.

Markets are pricing in about 170 basis points of Fed rate cuts this year, “especially as real sector data could suggest the U.S. economy continues to grow at a pace of 1.8% in the fourth quarter. “It appears that we continue to be unduly aggressive,” Mark Chandler said. , Chief Market Strategist at Bannockburn Global Forex. “Real sector statistics in the coming days could prompt aggressive wagering reductions.”

Oil prices were little changed as the risk that airstrikes by the US and its allies against the Houthis sparked a wider conflict and disrupted the flow of oil from the Middle East was balanced by softer fundamentals.

Here are the main events on the market this week:

• The World Economic Forum opens in Davos on Monday with this year’s theme: “Rebuilding Trust.”

• Eurozone industrial production, Monday

• Eurozone finance ministers meet in Brussels on Monday

• Germany releases 2023 growth rate on Monday, including fourth quarter forecast

• The Iowa Republican caucuses, the first nominating contest in the 2024 US presidential election, Monday.

• Japan PPI, Tuesday

• German CPI, ZEW survey forecast, Tuesday

• UK unemployment rate, Tuesday

• US Empire Manufacturing, Tuesday

• Goldman Sachs Group and Morgan Stanley will report earnings on Tuesday.

• Federal Reserve President Christopher Waller speaks on Tuesday

• China’s GDP, real estate prices, retail sales, industrial production, Wednesday

• Eurozone CPI, Wednesday

• UK CPI, Wednesday

• US retail sales, industrial production, business inventories, Wednesday

• Fed releases Beige Book survey on Wednesday

• European Central Bank President Christine Lagarde speaks at Davos on Wednesday

• New York Fed President John Williams speaks on Wednesday

• Australian unemployment rate Thursday

• Japan’s industrial production Thursday

• European Central Bank releases report of December policy meeting on Thursday

• U.S. housing starts, new unemployment insurance claims, Thursday

• Atlanta Fed President Rafael Bostic speaks Thursday

• Japan CPI, Friday

• U.S. existing home sales, University of Michigan consumer sentiment, Friday

• Congress faces deadline Friday to pass spending deal before partial federal government shutdown

• San Francisco Fed President Mary Daley speaks on Friday

The main movements in the market are:

stock

• S&P 500 futures were little changed as of 12:11 p.m. Tokyo time.S&P 500 little changed on Friday

• Nasdaq 100 futures were little changed.Nasdaq 100 almost unchanged

• Japan’s TOPIX index rose 1%

• Hong Kong’s Hang Seng Index rose 0.1%.

• China’s Shanghai Composite Index rose 0.4%.

• Australia’s S&P/ASX 200 index little changed

currency

• Bloomberg Dollar Spot Index little changed

• The euro rose 0.1% to $1.0966.

• The Japanese yen fell 0.1% to 145.04 yen to the dollar.

• The offshore yuan rose 0.2% to 7.1774 yuan to the dollar.

• The Australian dollar rose 0.2% to $0.6699.

cryptocurrency

• Bitcoin fell 0.2% to $42,415.15.

• Ether fell 0.8% to $2,505.82.

bond

merchandise

• West Texas Intermediate crude rose 0.2% to $72.86 per barrel.

• Spot gold rose 0.3% to $2,056.12 an ounce.

This article was produced in partnership with Bloomberg Automation.

–With assistance from Matthew Burgess and Zhu Lin.

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