A gauge of Asian shares looked set to notch its biggest weekly advance since January amid a rebound in Chinese stocks and bets that the Federal Reserve is approaching an interest-rate peak.
Futures for Hong Kong, Japan and Australia all pointed to gains on Friday that would extend the MSCI Asia Pacific Index’s rally of 3.9% this week. A measure of US-listed Chinese companies rose 2.6%, adding to the upbeat outlook as investors warm to signs of renewed efforts to bolster the economy.
Falling Treasury yields and positive sentiment for risk taking continued to weigh on the dollar, which steadied early Friday after sliding for a fifth-straight session. That’s put an index of the currency’s strength on pace for the worst week since November.
The yen traded around 138 to the greenback after strengthening for six consecutive days. There appears to be a sudden unwinding of speculative yen short positions, and a waning of yen carry trade momentum, Japan’s chief currency official, Masato Kanda, said late on Thursday.
Wall Street and markets globally got an extra dose of encouragement to bid up riskier assets after another US inflation report highlighted the view that price pressures are easing in the world’s largest economy.
Tech megacaps led gains on Thursday, with the S&P 500 topping 4,500 and the Nasdaq 100 up over 1.5%. Yields on policy-sensitive two-year Treasuries dropped 12 basis points to 4.63%.
Disinflation has become a buzzword across trading desks, even though core inflation is still running above the central bank’s 2% target. Equities gained further traction on news that Fed Bank of St. Louis President James Bullard — who called for aggressive hikes — has resigned.
Amazon.com Inc. hit a 10-month high after reporting record sales during its Prime Day sale. Google’s parent Alphabet Inc. rallied about 4.5%. Banks also gained ahead of results from JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. Two-year yields fell 11 basis points to 4.64%. The dollar dropped for a fifth straight day.
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The producer price index for final demand rose 0.1% in June from a year earlier, the smallest advance since 2020. The figures came just a day after data showed consumer prices increased at the slowest pace since 2021.
“The disinflation narrative is in full effect,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “It does appear that inflation is coming down across the board, and although the Fed is still likely to raise rates again at the end of this month, there is a very strong possibility that they are done raising rates for the year.”
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Fed Bank of San Francisco President Mary Daly told CNBC Thursday that it’s too soon for policymakers to say they have done enough to return US inflation to their target. While the latest consumer-price report “is very positive,” the official said she’s in a “wait-and-see mode on that, because I remain resolute to bring inflation down to 2%.”
Traders are also awaiting the unofficial start of the second-quarter US earnings season Friday. Goldman Sachs Group Inc. strategists expect US companies to be able to meet the low bar set by consensus. Bloomberg Intelligence strategist Gina Martin Adams said “the S&P 500 earnings season will likely reveal more of the ‘less bad than feared’ trend that emerged in 1Q.”
In Asia, investors will turn their attention this morning to the People’s Bank of China, which has an opportunity to spell out its monetary policy outlook for the year amid rising speculation about support for the economy. Questions about the extent to which the central bank can continue to ease monetary policy are likely to be a key focus during a press conference about first-half financial data hosted by Deputy Governor Liu Guoqiang.
Australian assets will also come under the spotlight after a report that the government will not reappoint Philip Lowe as central bank governor.
Key events this week:
- US University of Michigan consumer sentiment, Friday
- US banks kick off earnings, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 7:05 a.m. Tokyo time. The S&P 500 rose 0.85%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1.7%
- Nikkei 225 futures rose 0.7%
- Australia’s S&P/ASX 200 Index futures rose 0.5%
- Hang Seng Index futures 1%
Currencies
- The euro was unchanged at $1.1226
- The Japanese yen was little changed at 138.03 per dollar
- The offshore yuan was little changed at 7.1513 per dollar
- The Australian dollar was little changed at $0.6888
Cryptocurrencies
- Bitcoin fell 0.3% to $31,293.93
- Ether was little changed at $1,984.62
Bonds
- The yield on 10-year Treasuries declined nine basis points to 3.76%
Commodities
- West Texas Intermediate crude rose 0.4% to $77.16 a barrel
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.
