Asian shares were primed to open higher Monday as positive momentum from a rally on Wall Street and signs of moderating US inflation underpinned support for global stocks.
Futures contracts for equities in Japan, Australia and Hong Kong all pointed to early gains, as did a gauge of US-listed Chinese companies, which advanced 1% on Friday.
The Nasdaq 100 rose almost 2% last week and notched its best ever first-half of a year, with Apple Inc. hitting the $3 trillion milestone along the way. The S&P 500 reached the highest since April 2022 and posted its best first half since 2019.
Traders were encouraged as data showed inflation is moderating, even if that comes at the expense of growth. The personal consumption expenditures price index, one of the Federal Reserve’s preferred inflation gauges, rose 0.1% in May. From a year ago, the measure stepped down to 3.8%, the smallest annual advance in more than two years.
This kept action in the bond market subdued Friday after what was an eventful first half for the rates market. The Treasury 10-year yields ended little changed a 3.84% and the two-year rate at 4.90%.
Major currencies were confined to narrow ranges versus the dollar early on Monday after a gauge of greenback strength slipped 0.3% Friday, extending this year’s losses.
Investors in Asia will be watching for official manufacturing purchase managers’ indexes across a host of economies Monday, along with readings for the China’s Caixin manufacturing PMI. The China data is expected to underscore the view that the world’s second-largest economy is still struggling to rebound.
Traders will also be weighing the implications of Chinese President Xi Jinping elevating a long-serving technocrat as the central bank’s top Communist Party official, which may indicate no drastic shifts in policy for now.
Stocks decoupling
From the US to markets around the world, the rally in equities has generated concern as well a celebration, given how much it appears to have decoupled from a worsening economic backdrop.
Nearly $5 trillion has been added to the value of companies in the Nasdaq 100 since the start of the year, with the tech-heavy gauge defying bubble warnings and jumping almost 40%. The advance in the most-influential group in the S&P 500 helped push the index up 16% in 2023. Gains have been even more pronounced when narrowed down to the megacap space — which has soared 74%.
While history shows that first-half rallies in the Nasdaq 100 of at least 10% are followed by returns averaging about 14% over the second half of the year, there’s worry over valuations. This has recently spurred a surge in bearish bets against the largest tech companies. Short interest as a percentage of shares available to trade is near 12-month highs for Microsoft Corp., Tesla Inc. and Amazon.com Inc., according to data compiled by S3 Partners.
Key events this week:
- China Caixin manufacturing PMI, Monday
- Eurozone S&P Global Eurozone manufacturing PMI, Monday
- UK S&P Global / CIPS UK Manufacturing PMI, Monday
- US construction spending, ISM Manufacturing, light vehicle sales, Monday
- Australia interest rate decision, Tuesday
- US Independence Day national holiday. Financial markets closed, Tuesday
- China Caixin services and composite PMI, Wednesday
- Eurozone S&P Global Eurozone services PMI, PPI, Wednesday
- OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
- FOMC issues minutes on June policy meeting, Wednesday
- New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
- US initial jobless claims, trade, ISM services, job openings, Thursday
- Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
- US unemployment rate, nonfarm payrolls, Friday
- ECB’s Christine Lagarde addresses REAIX 2023 event in Aix-en-Provence, France, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 7:33 a.m. Tokyo time. The S&P 500 rose 1.2% Friday
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1.6%
- Nikkei 225 futures rose 0.7%
- Australia’s S&P/ASX 200 Index futures rose 0.4%
- Hang Seng Index futures rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0912
- The Japanese yen was little changed at 144.32 per dollar
- The offshore yuan was little changed at 7.2706 per dollar
- The Australian dollar was little changed at $0.6662
Cryptocurrencies
- Bitcoin rose 0.5% to $30,731.09
- Ether rose 1.9% to $1,954.67
Bonds
- The yield on 10-year Treasuries was little changed at 3.84% Friday
Commodities
- West Texas Intermediate crude fell 0.3% to $70.42 a barrel
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.
