Asia Stocks Rise as Traders Bet on Fed Slowdown: Markets Roundup

(Bloomberg) — Asian stocks rose after U.S. shares had their best day in more than a month on Friday, as traders speculate that an unexpected contraction in services activity and a slowdown in wage growth will moderate the aggression of the Federal Reserve to the rise.

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Australian shares gained 1%, Korean shares rose 1.8% and US stock futures rose after the S&P 500 rose more than 2% on Friday to salvage the first weekly advance in recent five. Hong Kong futures rose 1.5% while Japanese markets are closed for a public holiday.

The dollar extended Friday’s slide after the Institute for Supply and Management’s services index fell to its lowest level since April 2020 into contractionary territory and cooler wage growth fueled expectations the Fed will cut its pace. rate increases. The South Korean won topped 1,250 to the dollar for the first time in six months.

The December inflation report to be released on Thursday will be on traders’ minds after employment data did not offer a clear picture of the state of the US labor market, with unemployment at its lowest level in decades, while wage gains were weak. Esther George of the Kansas City Fed warned on Friday that officials will have a tough road ahead as they try to balance inflation and employment, while others have previously emphasized rates will be higher and stay that way for longer than anticipated.

Read more: Fed officials call for more hikes even as price pressures cool

Swap contracts show investors now expect the policy rate to top out at less than 5% this cycle, down from 5.06% just before Friday’s jobs report. While traders remain divided on the size of the February rise, with 32 basis points discounted, it appears that a quarter point move is more likely than a half point increase.

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While the pressure on the Fed to raise 50 basis points on February 1 has subsided, “policymakers appear to be increasingly frustrated with market prices at odds with Fed signals in terms of both the rate of terminal funds as of the time of the initial rate cut. ”, BNP Paribas economists led by Carl Riccadonna wrote in a note to clients. “This could tip your bias toward a stronger response at the next meeting.”

Meanwhile, China’s economic growth will pick up quickly and return to its “normal” path as Beijing provides more financial support to private households and businesses to help them recover after the nation ended its Covid-19 policy. Zero, Guo Shuqing, Party Secretary of the People’s Bank. of China, he said in an interview with the People’s Daily published on Sunday.

Investors will also keep a close eye on Brazilian assets after thousands of supporters of former President Jair Bolsonaro stormed the country’s main government institutions in an insurrection that will test the leadership of President Luiz Inácio Lula da Silva just a week after taking office. post.

Read more: Brazil unrest Sap Investor sentiment after rocky start to year

Some of the main movements in the markets:

Stocks

• S&P/ASX 200 gained 1%

• The KOSPI index increased by 1.8%

• S&P 500 futures rose 0.2%. The cash market rose 2.3% on Friday

• Nikkei 225 futures added 0.9% on Friday. Cash markets are closed for a public holiday

• Hang Seng futures rose 1.5%

coins

• The Japanese yen gained 0.2% to 131.89 yen per dollar on Monday.

• The Australian dollar was up 0.2% at 68.92 US cents.

• The euro rose 0.2% to $1.0660

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Captivity

• The yield on the 10-year Treasury fell 16 basis points to 3.56% on Friday. There will be no cash trading in Treasuries in the Asian session on Monday.

• The yield on Australian 10-year notes fell 11 basis points to 3.71% on Monday.

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