Asia Stocks Gain on Better Sentiment; China Leads:
Solid US jobs data temper concern over threat of recession
US stock futures fluctuate after rally on Wall Street Friday
Asian shares advanced for a third day, led by gains in China, amid relative calm and positive sentiment across financial markets.
An Asia-Pacific stock index headed for its highest close in more than two weeks, with energy and materials companies pacing the rally. A gauge of the dollar slipped for a fifth day, while Treasury yields were little changed.
Japan’s Topix dropped as traders in the nation returned from Golden Week holidays, with a gauge of bank shares falling more than 1%.
Shares of Chinese banks climbed after at least three nationwide lenders lowered deposit rates, while in Australia, Westpac Banking Corp. rose 1.8% after first-half net profit beat analysts’ estimates.
Futures contracts for European stocks pointed to a muted start, while those for US equities fluctuated after the S&P 500 jumped 1.9% Friday to halt its longest losing streak since February. The benchmark climbed 1.9% as US regional banks rebounded while the VIX volatility gauge snapped a four-day surge.
The Nasdaq 100 rose 2.1%, with Apple Inc. climbing almost 5% after its earnings exceeded forecasts.
US payroll data published Friday showed hiring and worker pay gains accelerated in April in signs of labour-market resilience and inflationary pressures in the face of headwinds. The solid data has tempered fears of a US recession.
The employments figures also increased speculation the Federal Reserve will keep interest rates higher for longer and potentially leave the door open to an 11th straight hike in June.
Rates on swap contracts linked to Fed meetings — which on Thursday briefly priced in a cut in July — moved higher, to levels consistent with a stable policy rate until September, followed by at least two quarter-point cuts by year-end.
“Unless we see a sharp turnaround in the inflation numbers, the Fed ought to be quite comfortable with where policy rates are right now,” Tai Hui, chief Asia market strategist at JPMorgan Asset Management, said on Bloomberg Television.
Declines in Japanese financial stocks reflected rising interest rates, according to Michael Makdad, a senior analyst at Morningstar Inc. “In that sense, I think the weakest link in Asia is the Japanese banks,” including the nation’s regional banks and other unlisted lenders, he said.
Despite Friday’s stock rebound, investors still have much to worry about. The rout in US bank shares has the S&P 500 financials index on the verge of falling back below its 2007 peak.
Meanwhile, Treasury Secretary Janet Yellen sees “simply no good options” for solving the debt limit stalemate in Washington without Congress raising the cap. She even cautioned that resorting to the 14th Amendment would provoke a constitutional crisis.
“We see a chance that Treasury’s cash amount is enough to sustain till mid-June and probably slightly beyond that,” Oversea-Chinese Banking Corp. strategists Frances Cheung and Christopher Wong wrote in a note. However, “the irregular nature of fiscal receipts and outlays shall render investors staying cautious,” they said.
Investors are also awaiting the release this week of the US core consumer price index, which excludes food and energy and is closely watched by the Fed. It is projected to show a 5.5% increase in April from a year ago.
In Asia, attention will swing to China’s trade figures due in the first half of the week and inflation numbers set for release on Thursday.
Elsewhere in markets, oil ticked higher as investors assessed a complex outlook for global demand after a period of volatile trading. Gold gained.
Key events this week:
- US wholesale inventories, Monday
- US President Joe Biden scheduled to meet with congressional leaders on debt limit, Tuesday
- New York Fed President John Williams speaks to Economic Club of New York, Tuesday
- US CPI, Wednesday
- China PPI, CPI, Thursday
- UK BOE rate decision, industrial production, GDP, Thursday
- US PPI, initial jobless claims, Thursday
- Group of Seven finance minister and central bank governors meet in Japan, Thursday
- US University of Michigan consumer sentiment, Friday
- Fed Governor Philip Jefferson and St. Louis Fed President James Bullard participate in panel discussion on monetary policy at Stanford University, Friday.