Asian stocks began the week positively ahead of upcoming central bank meetings in the United States and Japan, following a strong rally on Wall Street that concluded a volatile week. U.S. futures and oil prices also saw increases. In Tokyo, the Nikkei 225 index surged by 2.5% to reach 38,587.87. The focus for Asian markets this week will be on the Bank of Japan’s monetary policy meeting scheduled for Wednesday, where there are widespread expectations of an increase in the key interest rate from its near-zero level to possibly up to 0.3%. The U.S. Federal Reserve will also have its policy meeting on Wednesday, and while it is expected to maintain its benchmark rate, it may signal support for a rate cut in September. Additionally, U.S. jobs data is anticipated on Friday.
As per Stephen Innes of SPI Asset Management, this week is crucial for macro watchers, with a desire for calm amidst preparing for potential volatility as market participants navigate central bank decisions and economic data. Innes cautioned against premature expectations of rate cuts amid the Federal Reserve’s efforts to combat inflation, likening it to wanting dessert before finishing the main course. The Japanese yen has weakened in anticipation of potential changes, with the U.S. dollar trading at 153.42 yen on Monday, down from 153.76 yen.
Hong Kong’s Hang Seng rose by 1.8% to 17,331.24, while the Shanghai Composite index remained nearly unchanged at 2,892.10 following data showing a 3.5% increase in industrial profits in the first half of 2024 compared to the previous year. Australia’s S&P/ASX 200 advanced by 0.8% to 7,988.20, and South Korea’s Kospi jumped 1.2% to 2,765.05. Taiwan’s Taiex gained 0.7%, while the SET in Bangkok was closed for a holiday.
On Friday, the S&P 500 had a strong performance, climbing by 1.1% to 5,459.10, marking its best day in seven weeks. The Dow Jones Industrial Average soared by 1.6% to 40,589.34, and the Nasdaq composite rose by 1% to 17,357.88. The market saw widespread gains across various sectors, including Big Tech companies and smaller stocks. Nvidia and other tech stocks rebounded slightly, following concerns raised by Tesla’s and Alphabet’s profit reports. Market sentiment was also buoyed by 3M’s positive earnings report, with the company’s stock jumping by 23% after beating analysts’ expectations.
Investor optimism was further supported by Friday’s update on inflation, with U.S. consumer prices rising by 2.5% in June compared to a year earlier, slightly lower than the 2.6% inflation rate in May. In early trading on Monday, U.S. benchmark crude oil rose by 18 cents to $77.34 per barrel, and Brent crude, the international standard, increased by 28 cents to $80.56 per barrel. The euro also saw a slight rise against the dollar, reaching $1.0862 from $1.0857.
