(Bloomberg) — Asian shares are expected to rise in early trading, following U.S. peers on Friday, as expectations for interest rate cuts from the Federal Reserve were strengthened after the central bank’s preferred measure of inflation declined.
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Stock futures in Australia, Japan and Hong Kong point to a higher open on Monday. U.S. contracts were little changed after the S&P 500 rose 0.8% in the previous session, following a late rise amid a rotation from technology stocks to other sectors.
The gains follow the best month for Asian shares since March last month, helped by signs of stabilization in the Chinese economy and a weaker dollar amid bets that the Fed could cut rates this year. But with valuations looking stretched, markets are likely to be volatile as traders assess the prospects for central bank policy while geopolitical tensions around the Middle East and the US election simmer, AMP Ltd said.
“We continue to see further gains in equities this year as disinflation continues, central banks eventually cut rates and a recession is avoided or proves to be mild,” said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney. “But the risks of a deeper correction than April have increased.”
Oil fell in early trading after OPEC+ extended its production cuts in efforts to shore up a fragile market. While the deal exceeded market expectations, supply cuts will also be reversed in October, earlier than some OPEC observers had expected.
Elsewhere, elections in India and Mexico are likely to set the tone for emerging markets. Indian stocks, bonds and the rupee are set to rise on Monday after exit polls indicated a resounding victory for Prime Minister Narendra Modi’s party, while the Mexican peso was trading higher in early trade with polls still open.
Follow Bloomberg’s live blog of the Mexican elections here for the latest results
The dollar was steady in early trading. U.S. Treasury bonds rose on Friday as the Fed’s preferred inflation measure, the main price gauge for personal consumer spending, met expectations and posted the smallest gain this year. Inflation-adjusted consumer spending unexpectedly fell 0.1%, driven by a decline in spending on goods and softer services spending. Wage growth, the main fuel for demand, is subdued.
“While this is unlikely to be enough to justify an upcoming Fed rate cut, we believe recent data continues to support our base case for a soft landing,” wrote Solita Marcelli, chief investment officer for the Americas at UBS’ asset management division Group AG. a note. “This should allow the U.S. central bank to begin easing policy later this year, most likely at the September meeting in our view.”
Read more: The main engines of US consumer spending are losing steam overnight
Meanwhile, Saudi Aramco’s $12 billion share sale sold out shortly after the deal opened on Sunday, a boon for the government as it seeks funds to help pay for a massive economic transformation plan. While it was not immediately clear how much of the demand came from abroad, the order book reflected a mix of local and foreign investors, people familiar with the matter told Bloomberg News.
This week, traders will be closely watching inflation figures in emerging markets including Indonesia, South Korea and Chile, as well as growth data in Australia and Europe. Data on economic activity will also be released in Europe, as will the US jobs report.
Some of the major moves in the markets:
Shares
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Futures on the S&P 500 were little changed at 7:26 a.m. Tokyo time
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Hang Seng futures rose 0.4%
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S&P/ASX 200 futures rose 0.5%
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Nikkei 225 futures rose 0.6%
Currencies
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The euro was little changed at $1.0849
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The Japanese yen was little changed at 157.26 per dollar
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The offshore yuan was unchanged at 7.2630 per dollar
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The Australian dollar was little changed at $0.6651
Cryptocurrencies
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Bitcoin was little changed at $67,805.20
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Ether was little changed at $3,787.91
Bonds
Raw materials
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West Texas Intermediate crude fell 0.3% to $76.80 a barrel
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Gold fell 0.2% to $2,323.82 an ounce
This story was produced with the help of Bloomberg Automation.
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