(Bloomberg) — Asian stocks climbed, led by Japanese shares, as investors awaited policy decisions from Japan and the US this week for near-term trading cues.
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The MSCI Asia Pacific Index advanced, lifted by a rally in Japan with the tech-heavy Nikkei 225 index jumping the most in more than a month. China’s mainland equities also rose as the nation reported better-than-expected factory output and fixed-asset investment growth. US equity futures nudged higher after the S&P 500 fell 0.7% on Friday.
Some 90% of Bank of Japan watchers expect authorities to scrap their negative-rate policy on Tuesday. Speculation of a move has increased after Japan’s largest union group announced the strongest wage deals in more than three decades. The yen traded weaker against the dollar.
“Japanese stocks are rising, driven by weakness of the yen, and expectations that the currency won’t strengthen even if the central bank hikes,” said Charu Chanana, a strategist at Saxo Capital Markets based in Singapore. “Seems like BOJ is all priced in and focus is much more on Nvidia and Fed this week.”
In China, equities rallied on surprisingly strong economic numbers, which added to evidence of more traction for the world’s second-largest economy.
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The data, however, is unlikely to push the yuan out of its recent tight range as the currency is torn between China’s central bank and the upcoming Federal Reserve policy meeting, according to Commonwealth Bank of Australia.
“A potentially hawkish FOMC meeting can place upward pressure on dollar-offshore yuan” this week, CBA strategists led by Joseph Capurso wrote in a note to clients. But that “will likely be capped by the People’s Bank of China’s continued onshore yuan support at the daily fix.”
The Fed’s policy meeting Wednesday may dictate the direction of global stocks for the next quarter. Prior to the blackout period, Chairman Jerome Powell indicated the central bank was close to having the confidence to cut, while others debated how deep, or shallow, those declines will be.
Bond traders, meanwhile, appear to have painfully surrendered to a higher-for-longer reality. Yields on policy sensitive two-year Treasuries have climbed 11 basis points this month to 4.73%, extending last month’s gain. Swaps traders are pricing about 71 basis points of rate cuts by year-end, down from 134 basis points at the start of the year, according to data compiled by Bloomberg.
“The Fed may have less confidence on inflation than before, but it still has confidence in the disinflation trend,” and may keep its median forecast of three cuts this year, Bank of America economists including Michael Gapen wrote in a note to clients. “This may be fanciful thinking on our part, but there are several inflation reports and plenty of time between now and June to change course if needed.”
Read More: Traders Look to Consumer Stocks for Clues on Where Fed Is Headed
Meanwhile, several of Adani Group’s dollar bonds fell the most in more than half a year, after news that US prosecutors have widened their probe of the port-to-power conglomerate to focus on whether it may have engaged in bribery.
Elsewhere this week, the Reserve Bank of Australia is set to extend its rate pause while Bank Indonesia and the Bank of England also deliver policy decisions. Eurozone inflation data is due as well as Reddit Inc.’s initial public offering.
In commodities, oil ticked higher following the biggest weekly advance in a month as macro-economic data from China came in ahead of expectations, and Ukrainian attacks on Russian refineries heightened geopolitical risks. Gold edged lower while iron ore fell below $100 a ton in Singapore to its lowest level since last May.
Key events this week:
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Eurozone CPI, Monday
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Australia rate decision, Tuesday
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Japan rate decision, Tuesday
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Canada inflation, Tuesday
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China loan prime rates, Wednesday
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Indonesia rate decision, Wednesday
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UK CPI, Wednesday
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US rate decision, Wednesday
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Brazil rate decision, Wednesday
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ECB President Christine Lagarde speaks, Wednesday
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New Zealand GDP, Thursday
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Taiwan rate decision, Thursday
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Switzerland rate decision, Thursday
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Norway rate decision, Thursday
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UK rate decision, Thursday
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Mexico rate decision, Thursday
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European Union summit in Brussels, Thursday
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Japan CPI, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.3% as of 2:03 p.m. Tokyo time
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Nikkei 225 futures (OSE) rose 2.7%
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Japan’s Topix rose 1.8%
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Australia’s S&P/ASX 200 was little changed
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Hong Kong’s Hang Seng was little changed
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The Shanghai Composite rose 0.5%
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Euro Stoxx 50 futures rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0887
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The Japanese yen was little changed at 149.12 per dollar
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The offshore yuan was little changed at 7.2050 per dollar
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The Australian dollar was little changed at $0.6564
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The British pound was little changed at $1.2731
Cryptocurrencies
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Bitcoin was little changed at $68,249.1
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Ether fell 0.7% to $3,608.88
Bonds
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The yield on 10-year Treasuries was little changed at 4.30%
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Japan’s 10-year yield declined three basis points to 0.755%
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Australia’s 10-year yield declined one basis point to 4.12%
Commodities
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West Texas Intermediate crude rose 0.5% to $81.41 a barrel
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Spot gold fell 0.4% to $2,147.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael G. Wilson.
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