(Bloomberg) — Asian shares extended a rally in global equities that continues to defy concern over risks to economic growth and elevated interest rates. Oil surged on a supply cut from Saudi Arabia.
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Crude jumped more than 3% before trimming its move after the pledge to make an extra 1 million barrel-a-day reduction in July, which trims Saudi Arabia’s production to the lowest level for several years.
Stock benchmarks in Japan and Australia advanced more than 1% Monday while South Korea’s Kospi rose about 0.4%. Shares in Hong Kong opened marginally higher before falling slightly, along with Shanghai’s main index.
Contracts for the S&P 500 fell slightly in Asia after further gains Friday took the underlying measure to the cusp of a bull market. An MSCI Inc. gauge of equities across developed and emerging markets is at the highest since May, despite increasing worries about an economic slowdown in China and the prospect of higher interest rates in the US.
Gains in the US on Friday were fueled by big tech, options positioning and bets for a Fed to hold rates unchanged this month, before a likely increase in July.
A mixed jobs report shaped the wagers on the Fed, with signs of labor-market slackening in May despite a pickup in hiring. That bolstered the argument from Fed Chair Jerome Powell and other officials that they should take more time to assess incoming data and the evolving outlook before raising rates again.
Two-year Treasury yields, which are more sensitive to imminent central bank moves, rose five basis points, adding to an increase of 16 basis points on Friday. Australia’s three-year government bond yields jumped about 11 basis points following the move in Treasuries and ahead of a central bank rates decision Tuesday.
A gauge of dollar strength was fractionally higher, in part reflecting rising US yields. The euro, the pound and the Australian dollar moved lower while the yen weakened past 140 versus the greenback.
As stocks rose in the US on Friday, Wall Street’s “fear gauge” plummeted to pre-pandemic levels. The Cboe Volatility Index, or VIX, dropped below 15 from an average of 23 in the past year.
Broadcom Inc. climbed after predicting that sales tied to artificial intelligence will double this year.
“The impressive run for equities continues to drive retail investors into the market,” said Mark Hackett, chief of investment research at Nationwide. “Investors have spent much of the past three years obsessed by the Fed, inflation, and payrolls, though volatility around those reports has settled, reflecting a less emotional market. This is bullish, as less reactivity is a sign of a healthy market.”
The stock advance doesn’t mean the market isn’t facing headwinds, according to Quincy Krosby, chief global strategist at LPL Financial.
Among the risks, she cites the potential ramifications of the deluge of Treasury notes — approximately $1 trillion — to be auctioned as the US department replenishes its general account following a debt-limit deal. that could ignite a significant sapping of liquidity from financial markets, she noted.
Key events this week:
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China Caixin services PMI, Monday
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Eurozone S&P Global Eurozone Services PMI, PPI, Monday
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US factory orders, ISM services, Monday
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ECB President Christine Lagarde appears in European Parliament, Monday
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Rate decisions in Australia, Poland, Tuesday
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China forex reserves, trade, Wednesday
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US trade, consumer credit, Wednesday
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Canada rate decision, Wednesday
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EIA crude oil inventory data, Wednesday
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Eurozone GDP, Thursday
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Rate decisions in India, Peru, Thursday
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Japan GDP, Thursday
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US wholesale inventories, initial jobless claims, Thursday
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China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.1% as of 10:32 a.m. Tokyo time. The S&P 500 rose 1.4% Friday
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Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 0.7%
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Euro Stoxx 50 futures fell 0.2%
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Japan’s Topix rose 1.2%
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Australia’s S&P/ASX 200 rose 1.1%
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Hong Kong’s Hang Seng fell 0.2%
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The Shanghai Composite fell 0.1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro fell 0.1% to $1.0694
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The Japanese yen was little changed at 140.05 per dollar
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The offshore yuan fell 0.1% to 7.1184 per dollar
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The Australian dollar fell 0.3% to $0.6591
Cryptocurrencies
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Bitcoin fell 0.7% to $27,046
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Ether fell 1.2% to $1,882.23
Bonds
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The yield on 10-year Treasuries advanced three basis points to 3.72%
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Japan’s 10-year yield advanced 1.5 basis points to 0.425%
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Australia’s 10-year yield advanced 10 basis points to 3.74%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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