Asia Stocks Set for Two-Month High; Dollar Weakens:
- US currency drops for fourth day, euro advances further
- S&P 500 has best day this month, Nasdaq 100 jumps 2%
Asian equity markets advanced on speculation the Federal Reserve and other central banks are nearing the end of their hiking cycles. The dollar slipped further.
An Asia Pacific stock gauge was on course for its highest close since February as major indexes gained from Japan to Australia, tracking rallies in US stocks.
The S&P 500 climbed the most this month on Thursday, and the tech-heavy Nasdaq had the best day since the middle of March following weaker-than-expected US producer prices. US equity futures were little changed, while those for Europe pointed to gains.
“Japanese stocks are expected to be firm throughout the day as the outlook for US monetary tightening has receded given the softening US PPI data and an increase in jobless claims,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities in Tokyo.
In a further sign rates are peaking around the world, Singapore’s central bank kept its policy settings unchanged after five tightening moves.
A Bloomberg gauge of the dollar slipped for fourth day to the lowest since early February as the US currency weakened against all its Group-of-10 peers. The euro extended recent gains, climbing to the strongest in a year on speculation the Fed has just one rate hike left in May. South Korea’s won led gains in Asian currencies.
“US dollar weakness is looking a bit stretched at the moment given the market still looks for Fed rate cuts later this year and inflation is likely to remain persistent,” said David Forrester, a senior strategist at Credit Agricole CIB in Singapore. “Signs of the US economy looking resilient would see the USD bounce, so US retail sales and University of Michigan consumer sentiment data later today will be important.”
Treasuries steadied Friday after falling on Thursday amid improved risk sentiment. The policy-sensitive two-year yield held within a narrow range around 3.97% as the market continued to lean toward a quarter-point Fed hike in May with the central bank then expected to pause over the summer.
US rates have begun a process of consolidation that may stretch through next week and into the pre-Federal Open Market Committee period of radio silence, according to BMO strategists Ian Lyngen and Benjamin Jeffery. “Investors will remain wary of any indication that the regional banking turmoil has translated into materially tighter lending standards throughout the system,” they wrote in a note.
As US banks kick off the earnings season later on Friday, “even confirmation that lenders are taking a more conservative approach will offer no ‘obvious’ market implications in light of the fact 10-year yields are already trading in a sub-3.50% range,” they said.
Meanwhile, China’s largest banks are planning at least 40 billion yuan ($5.9 billion) of bond sales, kicking off a major funding push to comply with global capital requirements by early 2025.
In commodities, oil headed for a fourth week of gains amid signs of a tightening global market and a weaker dollar. Gold was set for a second weekly increase.
Key events this week:
- US retail sales, business inventories, industrial production, University of Michigan consumer sentiment, Friday
- Major US banks JPMorgan Chase, Wells Fargo and Citigroup report earnings, Friday