(Bloomberg) — Asian stocks rose in early trading, following Wall Street’s gains on optimism the Federal Reserve will start cutting interest rates this year. The yen dropped.
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Japan’s benchmark Nikkei 225 climbed as much as 1.6% as the market reopened on Tuesday after a holiday. Australian shares rose 0.7%. The upward momentum came after the S&P 500 rose 1% and topped its average price over the past 50 days — a level seen by many chartists as key in maintaining the positive sentiment.
The yen fell after Japan’s top currency official Masato Kanda said that while authorities would take action in the event of volatility, there was no need for the government to intervene if the market is functioning properly.
Oil rose 0.5% in early Asia trading, while US stock futures were steady after Israel rejected a statement from Hamas that it had accepted a cease-fire proposal to end the fighting in Gaza.
The US equity benchmark rose above 5,180 on Monday. Nvidia Corp. and Tesla Inc. paced gains in megacaps. Micron Technology Inc. jumped on an analyst upgrade. Apple Inc. fell, with Warren Buffett revealing he’d cut his stake even after heaping praise on the iPhone maker. Treasury 10-year yields slid two basis points to 4.49%.
“Bulls will be looking to maintain their momentum after snatching last week from the jaws of bears,” according to 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.”
Read: Fed Says More Banks Tightened Loan Standards to Start 2024
In Asia, there’s renewed optimism for the bruised Chinese economy, with Beijing’s latest supportive policy stance helping to boost shares and the onshore yuan on their return from holiday on Monday. Battered assets are getting a second look as a combination of earnings recovery, policy support and cheap valuations lure investors.
Australia’s central bank is expected to keep its key interest rate on hold Tuesday, while reinstating a hawkish bias to acknowledge sticky consumer prices.
In the US on Monday, investors waded through remarks from some of the many Fed officials due to speak this week.
Fed Bank of Richmond President Thomas Barkin said he expects high rates to slow the economy further and cool inflation to the 2% target. His New York counterpart John Williams said eventually there will be rate cuts — but the decision on when will depend on the totality of the data.
More than 80% of the S&P 500 companies have now reported first-quarter earnings, and profit growth has easily surpassed “mediocre expectations,” according to Gina Martin Adams at Bloomberg Intelligence. The index is now on pace for a 6.5% earnings growth, almost double pre-season estimates of 3.75%, she noted.
The backdrop for stocks remains supportive, driven by healthy and broadening profit growth, inflation that will likely resume falling, a Fed that is more likely to cut than hike rates, and surging investment in artificial intelligence, according to David Lefkowitz at UBS Global Wealth Management.
A soft landing or a so-called no landing, where growth is resilient even as rates stay high, both remain possible for the US economy, the team led by Michael Wilson wrote in a note. This uncertain backdrop warrants an investment approach that can work as market pricing and leadership between groups of stocks gets whipsawed by the potential outcomes.
Corporate Highlights:
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Boeing Co. faces a new investigation by US aviation safety regulators tied to inspections of the company’s 787 Dreamliner and whether employees may have falsified records.
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The US Securities and Exchange Commission warned Robinhood Markets Inc. that it faces an enforcement action over its crypto business — the latest sign that the regulator isn’t letting up on its years-long crackdown on digital assets.
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Chip-design company Synopsys Inc. is selling its software integrity business to two private equity firms for as much as $2.1 billion in cash.
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Tyson Foods Inc. said persistent inflation has eroded consumers’ appetite for the branded and ready-to-eat offerings accounting for most of the company’s profits.
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United States Steel Corp. was raised to overweight at Morgan Stanley, based on prospects for “transformational” investments.
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Exxon Mobil Corp. Chief Executive Officer Darren Woods foresees arbitration with Chevron Corp. over a premier Guyanese asset stretching into 2025 due to the importance of the case to both companies.
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Brookfield Asset Management struck a partnership with Castlelake LP to get a majority share of the private debt firm’s fee-related earnings, another move in the Canadian investing giant’s effort to grow its credit business.
Key events this week:
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Australia rate decision, Tuesday
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Eurozone retail sales, Tuesday
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UBS earnings, Walt Disney, BP earnings, Tuesday
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Minneapolis Fed President Neel Kashkari speaks, Tuesday
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Toyota earnings, Wednesday
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Germany industrial production, Wednesday
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Fed Governor Lisa Cook speaks, Wednesday
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Bank of Japan issues summary of opinions from April policy meeting, Thursday
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China trade, Thursday
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UK BOE rate decision, Thursday
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US initial jobless claims, Thursday
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UK industrial production, GDP, Friday
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ECB publishes account of April policy meeting, Friday
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BOE Chief Economist Huw Pill speaks, Friday
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US University of Michigan consumer sentiment, Friday
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Chicago Fed President Austan Goolsbee speaks, Friday
Stocks
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S&P 500 futures were little changed as of 9:04 a.m. Tokyo time
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Hang Seng futures were little changed
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Japan’s Topix rose 0.7%, more than any closing gain since April 30
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Australia’s S&P/ASX 200 rose 0.2%, climbing for the fourth straight day, the longest winning streak since Feb. 27
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Euro Stoxx 50 futures rose 0.8%, more than any closing gain since April 26
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0768
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The Japanese yen fell 0.2% to 154.24 per dollar
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The offshore yuan was little changed at 7.2154 per dollar
Cryptocurrencies
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Bitcoin fell 0.1% to $63,228.68
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Ether fell 0.3% to $3,068.10
Bonds
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The yield on 10-year Treasuries advanced zero basis points to 4.49%, ending a four-day losing streak
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Australia’s 10-year yield was little changed at 4.38%
Commodities
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West Texas Intermediate crude rose 0.5% to $78.90 a barrel
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Spot gold rose 0.1% to $2,326.77 an ounce
This story was produced with the assistance of Bloomberg Automation.
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