By Wayne Cole
SYDNEY (Reuters) – Asian shares rose on Monday ahead of central bank meetings expected to include two more rate cuts and key U.S. inflation figures that should signal further easing there.
China’s central bank surprised many by cutting its 14-day repo rate by 10 basis points, a couple of days after disappointing markets by not cutting long-term rates. That helped boost Chinese blue chips by 0.5%.
A holiday in Japan caused light trading volume and MSCI’s index of Asia-Pacific shares outside Japan added 0.2 percent, after rebounding 2.7 percent last week.
The Tokyo index was closed, but futures were trading at 38,530, compared with the cash close of 37,723. The index rose 3.1% last week as the yen weakened from its highs and the Bank of Japan (BOJ) indicated it was in no hurry to tighten monetary policy further.
EUROSTOXX 50 futures rose 0.3% and 0.1%.
Nasdaq futures gained 0.3% and S&P futures rose 0.5%. The S&P is up 1% so far in September, historically the weakest month for stocks, and has gained 19% so far this year to hit an all-time high.[.N]
More than 20 billion shares changed hands on U.S. exchanges on Friday, the busiest session since January 2021. BofA analysts noted that the S&P rises an average of 21% when there is no recession in the 12 months after the start of Fed tapering.
Markets were still basking in the glow of the Fed’s half-percentage-point rate cut, with futures implying a 50-50 chance it would make another outsized move in November.
“While the move was well-publicized, it’s hard to overstate its significance given the Fed’s role in shaping dollar liquidity conditions around the world,” said Barclays economist Christian Keller.
“We note that starting a cycle with a 50 basis point move without an imminent financial crisis or job losses is quite unusual for the Fed,” he added. “Therefore, we believe the move reveals the Fed’s determination to avoid a deterioration in labor market conditions or, in market jargon, to achieve a soft landing.”
At least nine Federal Reserve policymakers are scheduled to speak this week, including prepared remarks from Chairman Jerome Powell, two governors and New York Fed President John Williams.
MORE CUTS
Much will depend on what the Fed’s preferred inflation gauge, core personal consumption expenditures (PCE), shows on Friday. Analysts expect a 0.2% month-over-month increase, which would lift the annual pace to 2.7%, while the headline rate is forecast to slow to just 2.3%.
Next week will also include surveys on global manufacturing, US consumer confidence and durable goods.
The Swiss National Bank meets on Thursday and markets are already pricing in a quarter-point cut to 1.0%, with a 41% chance of a 50 basis point cut.
Sweden’s central bank meets on Wednesday and is also expected to ease monetary policy by 25 basis points, although there is also a chance the move could be higher.
One bank that is not easing monetary policy is the Reserve Bank of Australia (RBA), which meets on Tuesday and is seen as almost certain to keep its rate at 4.35% as inflation remains persistent. (0#RBAWATCH>
Investors were also wary of negotiations to avert a US government shutdown just days before the current $1.2 trillion in funding runs out on September 30. Republican US House Speaker Mike Johnson proposed a three-month stopgap funding bill on Sunday, but it now has to go to a vote.
In currency markets, the dollar rose 0.3% to 144.35 yen, having rebounded 2.2% last week from a low of 139.58 yen. The euro gained almost 3% last week to 161.09 yen, while holding firm against the dollar at $1.1160.
Japan’s LDP, which has a parliamentary majority, will elect a new leader on Sept. 27, with the winner replacing outgoing Prime Minister Fumio Kishida.
The U.S. rate cut combined with lower bond yields helped keep gold at $2,620 an ounce, just above a record high of $2,625.59. [GOL/]
Net long positions on Comex hit a four-year high last week, suggesting some risk of a near-term pullback.
Oil prices firmed further, having risen around 4% last week on hopes that lower borrowing costs would support economic growth and global demand. [O/R]
added 40 cents to $74.89 a barrel, while it rose 39 cents to $71.39 a barrel.