Moving markets today: Hong Kong boosts Asian stocks, yen steady below 152 amid intervention threats; June US Fed rate-cut odds drop to around 60 per cent; focus on Fed officials speeches and jobs report
The Dow and S&P 500 saw minor declines as concerns lingered among investors regarding the Federal Reserve’s potential decision on interest rate cuts. However, in Asia, stocks trended upward on Tuesday, while the dollar strengthened, causing the yen to remain close to 152-per-dollar levels, prompting worries about potential intervention in currency markets. Oil prices climbed higher, supported by signs of increased demand and escalating tensions in the Middle East. Market sentiment regarding a rate cut by the Federal Reserve in June has slightly decreased, with current estimates suggesting a 61 per cent chance compared to 70 per cent the previous week. Investors anticipate gaining more clarity on the Fed’s stance this week, as 13 out of 19 Fed officials are scheduled to provide insights. Additionally, the U.S. monthly jobs report is eagerly awaited, with its release expected on Friday. Here are five key takeaways for your day.
Japan warns again of action against excessive yen volatility
Japanese Finance Minister Shunichi Suzuki reiterated the government’s stance on addressing excessive exchange rate fluctuations to prevent significant declines in the yen. While Suzuki refrained from specifying immediate action, it suggests officials are cautious as they monitor currency movements, Reuters reported.
Market focus remains on potential intervention by Tokyo as the dollar continues to hover around 151.610 yen in Asian trading, near its recent peak of 151.975 yen.
Market odds of June US Fed rate cut drop to around 60 per cent
The likelihood of the Federal Reserve cutting interest rates in June has slightly decreased, with markets now pricing in a 61 per cent chance compared to 70 per cent a week earlier, as indicated by the CME FedWatch Tool. Additionally, projections for total rate cuts this year have also been revised down to 68 basis points from the previously estimated 75 basis points.
Despite these adjustments, the Fed remains confident in the feasibility of rate cuts, especially after last week’s personal consumption expenditures report met expectations, showing a 2.5 per cent increase in inflation on an annual basis. Chairman Jerome Powell commented that this inflation level aligns with the central bank’s objectives. However, Powell also noted that the strong state of the economy suggests there is little rush to implement rate cuts.
Oil prices surge amid escalating tensions in the middle east
Oil prices saw gains on Tuesday, buoyed by indications of increased demand and escalating tensions in the Middle East. These tensions had led to a surge in U.S. futures to their highest level in five months during the previous session. Brent futures for June delivery rose by 32 cents, reaching $87.74 per barrel, while the May contract for U.S. West Texas Intermediate (WTI) crude futures increased by 35 cents, hitting $84.06 per barrel, Reuters reported.
In the Middle East, an Israeli airstrike on Iran’s embassy in Syria resulted in the deaths of seven military advisors, including three senior commanders. This event represents a heightening of the conflict that has been ongoing for nearly six months, raising concerns about potential disruptions to oil supply.
This week’s agenda: What’s on the radar
Japanese and Chinese monetary authorities are closely monitoring their currencies as they weaken against the US dollar. The yen is approaching 152 per dollar, and the yuan surpassed 7.2 per dollar. Japan issues verbal warnings, while China’s state banks buy yuan and sell dollars to counter the trend. There’s speculation that Beijing might tolerate a weaker yuan to compete with the yen, but uncertainty clouds the future.
As earnings season comes to a close, corporate news is relatively quiet. Investors are shifting their focus to US employment figures as the main economic indicator for the week. Additionally, attention is on various election events, such as parliamentary polls in Kuwait, a run-off vote in Slovakia’s presidential election, and local polls in Poland within the next seven days, the FT reported.
In the Eurozone, all eyes are on the release of flash inflation data for March, scheduled for Wednesday. This data is significant, especially amid speculation about potential rate cuts by the European Central Bank in June.
In the UK, in terms of economic activity, things are expected to be quiet. Attention is on the final manufacturing and services PMIs. Initial reports indicate a surge in manufacturing to a 21-month high in March, edging towards expansion. The services PMI is also forecasted to extend its five-month growth streak.
Hang Seng shines bright in mixed Asian markets
The global stock market experienced some ups and downs, with the Dow Jones Industrial Average dropping by 0.60 per cent to 39,566.85, while the S&P 500 saw a smaller decline of 0.20 per cent to 5,243.77. However, the Nasdaq Composite managed a slight gain of 0.11 per cent to reach 16,396.83. Notably, several tech giants like Amazon, Microsoft, Meta, Nvidia, and Alphabet saw their stock prices rise, though Tesla and Apple faced losses.
In Asia, Japan’s Nikkei index rose by 0.41 per cent, surpassing the 40,000-point milestone, while Hong Kong’s Hang Seng index surged by 1.6 per cent on its first trading day since Thursday. Xiaomi shares led the gains, jumping by 12 per cent following the launch of their first electric vehicle. Meanwhile, mainland China’s CSI 300 index remained stable after recent gains, with Japan’s Topix index edging up by 0.1 per cent and South Korea’s Kospi index also showing a slight increase of 0.2 per cent during early trading.
Currency markets saw the US dollar strengthen slightly against a range of currencies, reaching 105.04, just below its recent high of 105.07 touched on Monday. In commodities, spot gold prices remained relatively stable at $2,249.82 per ounce after reaching an all-time high of $2,265.49 on Monday.