- The Fed is up 25bp this week, while the ECB and BOE are up 50bp.
- Tech giant leads a host of revenues
- Oil up as Chinese LNY travel soars
SYDNEY (Reuters) – Asian stock markets opened cautiously on Monday in a week in which interest rates in Europe and the United States seemed certain to rise. .
Earnings from tech giants will also test the mettle of the Wall Street bulls who are pushing the Nasdaq to its highest level since January 2001.
Asia is no slouch either, with MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) up 11% in January, up nine months, as China’s swift reopening boosts the economic outlook. It hit a record high.
The index rose 0.1% early Monday, while Japan’s Nikkei Stock Average (.N225) rose 0.2% as investors hoped China’s markets would reopen after the Lunar New Year holidays.
Both S&P 500 and Nasdaq futures fell 0.1%.
Investors are confident the Federal Reserve will raise interest rates by 25 basis points on Wednesday and the Bank of England and the European Central Bank will raise interest rates by 0.5 points the day after, and any deviation from that script will come as a real shock. will be
Equally important is guidance on future policy, where analysts expect inflation’s hawkish message has not yet been defeated and more needs to be done.read more
“With the U.S. labor market still tight, core inflation rising and financial conditions easing, Fed Chair Powell’s tone is hawkish and the downward shift to a 25bp rate hike comes with a moratorium. JP Morgan expects another rally in March.
We also expect him to continue to oppose market pricing of rate cuts later this year.”
Given that futures rates now peaked at 5.0% in March and only return to 4.5% by the end of the year, there is a lot of work to do.
Yields on 10-year bonds have fallen 31 basis points so far this month to 3.518%, essentially easing financial conditions even as the Fed seeks to tighten.
This dovish outlook is also tested by data on US employment figures, the Cost of Employment Index, and various ISM surveys.
Recent Wall Street rally hinges heavily on earnings of Apple (AAPL.O), Amazon.com (AMZN.O), Alphabet (GOOGL.O), Meta Platforms (META.O) and others right.
Wedbush analysts wrote, “Apple will get a glimpse into the overall picture of global consumer demand and how China’s supply chain problems are slowly easing.”
“Based on our recent Asian supply chain check, we believe demand for the iPhone 14 Pro is holding up stronger than expected,” they added. We will cut back, but we don’t anticipate massive layoffs.”
Market pricing of early easing by the US Federal Reserve (Fed) has weighed on the dollar, which has fallen 1.5% so far this month against a basket of major currencies.
The euro rose 1.4% to $1.0870 in January, just below its nine-month high. The dollar fell 1% against the yen to 129.92.
A lower dollar and yields have been a boon for gold, which has so far risen 5.6% over the month to $1,928 an ounce.
China’s rapid reopening is seen as a windfall for commodities in general, supporting everything from copper to iron ore to oil prices.
Beijing reported a 74% surge in domestic Chinese New Year travel from last year, but still only half of pre-pandemic levels.read more
Early Monday morning, Brent rose 79 cents to $87.45 a barrel while US crude rose 66 cents to $80.34.
Reported by Wayne Cole.Edited by Christopher Cushing
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