Moving markets today: Asian stocks soar amid rate cut hopes, oil prices decline; China’s factory growth at 2-year peak; focus on ECB, BOC policy meeting, and US non-farm payroll data
Asian stock markets experienced a notable uptick on Monday as investors anticipated potential interest rate cuts in both Europe and Canada, which would align with the broader trend of global monetary policy easing. However, concerns lingered regarding stubborn inflation levels, potentially elongating the easing process. South Korean equities saw positive movement following news of potential oil and gas reserves. Despite OPEC+ extending deep output cuts until 2025, oil prices initially dipped. Gold prices stabilized as investors awaited further US economic data, hoping for clarity on the Federal Reserve’s approach to monetary policy easing. The upcoming release of Friday’s non-farm payrolls report holds significant weight, serving as a key indicator for market sentiment regarding future US interest rates. The European Central Bank is expected to implement a rate cut diverging from the US, while the Bank of Canada is set to announce its latest rate decision. Here are five key takeaways for your day.
China’s manufacturing sector achieves two-year high in growth: Caixin PMI
A recent private sector survey unveiled that China’s manufacturing sector saw significant growth in May, reaching its highest level in nearly two years. This growth was fueled by strong levels of production and an influx of new orders. The Caixin/S&P Global manufacturing Purchasing Managers’ Index (PMI) rose to 51.7 in May, up from 51.4 in the previous month. This surpassed analysts’ predictions of 51.5 and marked the sector’s fastest expansion since June 2022. In the PMI scale, a reading above 50 indicates growth, while below 50 suggests contraction.
Shein fashion group eyes London listing in days to come
The popular online fashion giant Shein is gearing up to secretly apply for a listing on the London Stock Exchange in the next few days, setting the stage for a potentially major initial public offering (IPO) in the UK. Sources familiar with the matter indicate that Shein plans to file its intention to go public confidentially with UK regulators, though the timing of this move might change. Shein had been considering a London listing as an alternative after encountering obstacles to its IPO plans in New York, partly due to heightened tensions between Beijing and Washington, the FT reported.
OPEC+ extends deep oil production cuts through 2025
During their Sunday meeting, OPEC+ decided to extend most of their significant oil production cuts until 2025 to stabilize the market amidst slow demand growth. This includes extending cuts of 3.66 million barrels per day (bpd) until the end of 2025 and 2.2 million bpd reductions until September 2024, with a gradual phase-out planned from October 2024 to September 2025.
What’s on the radar
The key economic event in the upcoming days, amid a flurry of early-month data, is the European Central Bank’s interest rate decision on Thursday. Markets are currently anticipating about an 80 per cent chance that the Bank of Canada will cut its rate to 4.75 per cent during Wednesday’s meeting, with a total of 59 basis points of cuts expected for the year.
Significant data releases to watch include US employment numbers and EU GDP data on Friday, along with earlier reports in the week featuring country-specific purchasing managers’ index (PMI) data that offer global comparisons. The US jobs report is particularly crucial as it will be the last major economic indicator before the Federal Reserve’s monetary policy meeting on June 11-12.
In the corporate sector, a few earnings reports are expected, with a focus on retail, notably from Inditex, the owner of Zara, a major player in high street fashion. Further details on these earnings and economic data follow.
In India, the conclusion of the world’s largest and longest-running election is set for this week, with the announcement of the new prime minister. Current Prime Minister Narendra Modi is poised to win a third consecutive term, a feat not achieved since Jawaharlal Nehru. If the poll predictions hold true, the official results on Tuesday will confirm a decisive victory for Modi.
Asian stocks gain as confidence in rate cuts grows
Chinese blue-chip stocks in the CSI300 index rose by 0.3 per cent. Japan’s Nikkei N225 advanced 1.1 per cent, recovering from recent lows, while South Korea’s KS11 climbed 1.8 per cent.
In India, markets rally, awaiting Tuesday’s election results to see if Prime Minister Narendra Modi’s alliance will increase its parliamentary majority, which could pave the way for more economic reforms.
European markets showed positive momentum with EUROSTOXX 50 futures up 0.9 per cent and FTSE 100 futures rising 0.74 per cent. In the US, S&P 500 futures edged up 0.2 per cent, and Nasdaq futures added 0.1 per cent.
Gold held steady at $2,330 an ounce, continuing its four-month uptrend, bolstered by central bank and Chinese buying.
Oil prices bounced back on Monday after an early decline, following OPEC+’s decision on Sunday to extend most oil output cuts until 2025, with some reductions being reversed starting in October 2024. Brent crude increased by 38 cents to $81.49 a barrel, and US crude went up by 39 cents to $77.38 a barrel.