(Bloomberg) — Most Asian stocks look poised to gain early Monday, after Wall Street was cheered by signals from Federal Reserve Chair Jerome Powell that US interest rates will be cut from next month.
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Futures show Hong Kong and Sydney equity benchmarks rising, though Tokyo shares may edge lower. Most regional bourses are expected to benefit from Powell’s Jackson Hole speech on Friday, when he said the “time has come” to pivot to monetary easing. US equity contracts eased in early trading. Australian bonds rose.
Traders will also be closely watching rising tensions in the Middle East, with Israel bracing for an expanded conflagration that could involve Iran and its allied militias. Oil climbed 0.4% early Monday.
While markets had already priced in the start of policy easing in September, investors welcomed Powell’s comments. All major groups in the S&P 500 gained, with the gauge up over 1%. An MSCI index of global shares hit an all-time high. The Bloomberg “Magnificent Seven” gauge of megacaps rose 1.7%. The Russell 2000 of small firms jumped 3.2%.
At the weekend, Israel declared a 48-hour state of emergency and shut its main airport for several hours, with numerous foreign airlines canceling flights. About 100 Israeli warplanes swooped over southern Lebanon, taking out thousands of Hezbollah missile launchers in what was called a pre-emptive strike.
In currency markets, the Japanese yen climbed 0.5% on Monday. The country is also bracing for Typhoon Shanshan, which is set to strike its western coast Wednesday, causing as much as $10 billion in damage and losses from winds, storm surge and flooding rains.
‘Green Light’
Some Fed watchers indicated there were some devils in the details of Powell’s speech. While he acknowledged recent progress on inflation and saw the economy growing at a “solid pace”, it was his emphasis on the “cooling labor market” that got the attention of many market observers. Basically, it was seen as an indication the Fed will do whatever it can to avoid a pronounced slowdown.
“The market should be happy with this speech because it wasn’t hawkish in any way, gave the green light for 25 basis-point rate cuts — and left the door open for even larger cuts if that becomes necessary,” said Chris Zaccarelli at Independent Advisor Alliance.
Swap traders on Friday were pricing in 102 basis points of easing this year, which implies a reduction at every remaining policy meeting through December, including one jumbo 50-basis-point cut. A rally in Treasuries was led by shorter maturities, with the two-year yield breaking below 4%. The dollar lost 1%.
Gold jumped as much as 1.3% after Powell’s speech and remains within touching distance of an a fresh all-time high. It was little changed early Monday.
Key events this week:
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China medium-term lending facility operations, Monday
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Singapore industrial production, Monday
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US durable goods, Monday
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China industrial profits, Tuesday
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Germany GDP, Tuesday
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Hong Kong trade, Tuesday
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Australia CPI, Wednesday,
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Nvidia Corp. earnings, Wednesday
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US GDP, Initial Jobless Claims Thursday
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US personal income, spending, PCE price data, Friday
Some of the main moves in markets:
Stocks
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Hang Seng futures rose 0.6% as of 8:04 a.m. Tokyo time
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Nikkei 225 futures fell 0.3%
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S&P/ASX 200 futures rose 0.5%
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S&P 500 futures fell 0.1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The Japanese yen rose 0.5% to 143.70 per dollar
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The euro was unchanged at $1.1192
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The offshore yuan was little changed at 7.1146 per dollar
Cryptocurrencies
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Bitcoin rose 0.6% to $64,605
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Ether rose 0.2% to $2,776.5
Bonds
Commodities
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