(Bloomberg) — Asian stocks followed gains versus their U.S. counterparts as a easing in U.S. consumer inflation expectations strengthened the case for the Federal Reserve to cut interest rates this year.
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Markets in Hong Kong, China, Australia, South Korea and Japan advanced on Monday. US stock futures were little changed.
The renewed optimism comes after a gauge of Asian shares suffered its worst week in more than a month. The losses were fueled by doubts about whether the Fed will cut rates this year and concerns about the implementation and effectiveness of a real estate rescue package in China.
In Japan, the yen traded slightly stronger against the dollar after Bank of Japan Governor Kazuo Ueda said Monday that the central bank will act cautiously to anchor inflation expectations at 2%. The yen hovered around 157 per dollar as markets priced in the possibility of another BOJ rate hike this year.
Wall Street got some relief when data from the University of Michigan showed that consumers expect prices to rise 3.3% annually over the next year, up from the 3.5% expected earlier this month. Later this week, the Federal Reserve’s frontline inflation gauge, due out Friday, will show some modest relief from persistent price pressures.
Federal Reserve Chairman Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustainable path to its 2% target before cutting interest rates, which have been at a 20-year high since July stands.
Read more: On the ‘T+1’ rule that makes US stocks settle down in a day: QuickTake
The dollar fell in Asia on Monday, while cash government bond trading was closed. With US markets closed on Monday for Memorial Day, the “T+1” rule will come into effect when traders return from the long weekend – allowing US stocks to settle in one day instead of two.
Among the U.S. central bankers who spoke during the shortened holiday week are John Williams, Lisa Cook, Neel Kashkari and Lorie Logan.
Elsewhere this week, investors will be paying close attention to China’s industrial earnings and PMI data to help gauge the health of the world’s second-largest economy. A slew of inflationary pressures from Australia to Japan and the Eurozone are also expected as traders turn their finesse to the monetary policy outlook.
In commodities, oil and gold rose. This year has seen a continued series of increases in commodity prices, driven by supply constraints, rising demand and even some speculative activity. The Organization of the Petroleum Exporting Countries and its partners will meet online on June 2 to discuss supply cuts.
Some important events this week:
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Philip Lane of the ECB will speak about inflation in Dublin on Monday
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The IMF is holding talks with Ukrainian authorities to review economic policies as the country tries to release the next tranche of $2.2 billion in aid, Monday
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Cleveland Fed President Loretta Mester speaks at BOJ event in Tokyo; Minneapolis Fed President Neel Kashkari and ECB Governing Council member Klaas Knot address the Barclays-CEPR International Monetary Policy forum on Tuesday
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South African elections on Wednesday, the most important since the end of apartheid
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Fed releases the Beige Book economic survey on Wednesday
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South Africa rate decision, US initial unemployment claims, GDP, wholesale stocks, Thursday
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New York Fed President John Williams speaks at the Economic Club of New York on Thursday
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GDP data released for Canada, Eurozone and Turkey, Friday
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Unemployment in Japan, CPI in Tokyo, industrial production, retail sales, Friday
Some of the major moves in the markets:
Shares
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Futures on the S&P 500 were little changed at 10:26 a.m. Tokyo time
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Nikkei 225 futures (OSE) rose 0.3%
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Japan’s Topix rose 0.2%
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Australia’s S&P/ASX 200 rose 0.6%
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Hong Kong’s Hang Seng gained 0.4%
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The Shanghai Composite rose 0.2%
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Euro Stoxx 50 futures fell 0.1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0850
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The Japanese yen rose 0.1% to 156.76 per dollar
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The offshore yuan was little changed at 7.2584 per dollar
Cryptocurrencies
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Bitcoin was little changed at $68,734.51
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Ether fell 0.4% to $3,843.35
Bonds
Raw materials
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West Texas Intermediate crude rose 0.2% to $77.87 a barrel
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Spot gold rose 0.2% to $2,338.41 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Matthew Burgess.
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