Asian share markets firmed on Monday as the Nikkei reached another new high and investors braced for a week packed with central bank events and major data that will refine market wagers for when interest rates will start falling.
All eyes will be on Federal Reserve Chair Jerome Powell when he testifies before lawmakers on Wednesday and Thursday, though analysts assume he will stay in wait-and-see mode on policy given recent upside surprises on inflation.
The February payrolls report on Friday could also shift the calculus with forecasts favouring a still-solid rise of 200,000 after January’s barnstorming 353,000 jump.
The European Central Bank meets Thursday and is considered certain to keep rates at 4.0 per cent, but also lower its outlook for inflation in a nod to eventual cuts.
“The focus will be on the changes to the macro projections and on the tone, which we expect to be dovish but cautious – in a risk-management posture that should point to June for the first move lower in rates,” wrote analysts at NatWest Markets in a note.
“1One hundred basis points still seems the right amount of cuts for this year,” they added. “While the ECB is not pressed to act with urgency and may prefer to start with a 25bp clip, instead of our central scenario of a first 50bp cut in June.”
The Bank of Canada is likewise expected to stay on hold this week, with a first cut seen in June or later.
Other events of note include President Joe Biden’s State of the Union address, the Super Tuesday US primaries and China’s National People’s Congress (NPC) meeting which might flag new stimulus measures.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 per cent, after snapping a five-week winning streak with a slight drop last week.
Japan’s Nikkei climbed 0.8 per cent to break 40,000 for the first time, having risen for five weeks straight.
S&P 500 futures and Nasdaq futures were trading near flat, having made record closing highs on Friday on upbeat earnings and enthusiasm for all things AI.
BofA analyst Savita Subramanian now sees the S&P 500 pushing on to 5,400, thanks to solid earnings, though there is a risk of a correction given how far the market has come.
“The era of lower quality growth where cheap capital and globalisation contributed to margins is over,” says Subramanian.
“Now it’s time for sustainable efficiency and productivity gains supported by automation and AI.”
In currency markets, the dollar had been weighed by some soft US economic data, while the Japanese yen firmed ahead of Tokyo consumer price data on Tuesday that is expected to show inflation sprang higher in February.
The dollar stood at 150.08 yen, having peaked at 150.85 last week, while the euro steadied at $US1.0842 ($A1.6593) after bouncing from a low of $US1.0796 ($A1.6523) last week.
The US data surprise had helped gold to a two-month top and the metal was last trading steady at $US2,083 ($A3,188) an ounce.
Oil prices were little changed as OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter.
Brent rose two cents to $US83.57 ($A127.90) a barrel, while US crude edged down 5 cents to $US79.92 ($A122.31) per barrel.
This post was originally published on Michael West.
