06 MAY 2024

The Trade Academy Team

07:30 CET - 3 min read

Monday Morning Coffee - Markets Update - 06 May 2024 - APAC Equities Rally Amid Speculation of Fed Rate Cut; Yen Eases Gains

Markets Update: Stock markets in Asia rose on Monday on renewed expectations of Fed rate cuts, with China's markets particularly strong after their holiday break, though the Japanese yen weakened after its recent gains.

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Global Markets Roundup: 06 MAY 2024

Stock markets across the Asia-Pacific region saw a surge on Monday, largely propelled by renewed speculation that the Federal Reserve might opt for rate cuts later this year. Meanwhile, the Japanese yen, which had experienced a notable upswing last week following suspected currency intervention by Tokyo authorities, witnessed a slight weakening. Trading activity in Asia was relatively subdued with Japan observing a holiday, though mainland China's markets opened on a positive note after an extended break.

The MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) edged more than 0.5% higher, with China's blue-chip index 3399300 registering a gain of 1.4%. Last week, Chinese offshore shares performed strongly while mainland markets were closed from Wednesday to Friday due to the Labour Day holiday. Hong Kong's Hang Seng Index HSI surged by 4.7% last week, marking its lengthiest daily winning streak since 2018. However, it saw a minor decline of 0.2% on Monday.

The Nasdaq-listed Golden Dragon China Index HHXC demonstrated a significant increase of 5.5% over the course of last week. Similarly, in currency markets, the offshore yuan USDCNH experienced a slight decline of approximately 0.1%, settling at 7.2013 per dollar after strengthening by over 1% the previous week, partly attributed to a weakening dollar.

On Monday, the People's Bank of China elevated its official yuan midpoint to its highest level in three weeks, aligning with movements in offshore trading. Consequently, the onshore yuan USDCNY reached its highest point in over a month at 7.2009 per dollar. The rebound observed in Chinese markets follows the recent Politburo meeting, during which policymakers expressed intentions to bolster the economy through prudent monetary and proactive fiscal measures.

Furthermore, the broader market rally across Asia received a significant boost from Friday's U.S. nonfarm payrolls report, which indicated a cooler-than-expected job market. This reinforced expectations of potential Fed rate cuts later this year, especially after Chair Jerome Powell reaffirmed the central bank's easing bias last week. Economists at Wells Fargo commented, "Data point to a jobs market that is still tight, but not nearly as hot as it was a year or two ago. This should support a further slowdown in inflation as the year progresses, even if improvement proceeds only gradually.

With the absence of major U.S. economic data scheduled for this week, traders remained vigilant for any potential volatility in the yen following last week's suspected intervention by Japanese authorities to counteract a sharp decline in the currency. Leaders from South Korea, Japan, and China had cautioned on Friday about heightened foreign exchange market volatility, identifying it as one of the risk factors that could impact regional growth prospects in the near term.

In currency markets, the yen USDJPY relinquished some of its gains on Monday, experiencing a 0.4% decrease to 153.62 per dollar. The dollar maintained its stability on Monday, resulting in the euro EURUSD trading away from a one-month high at $1.0766, while sterling GBPUSD remained relatively steady at $1.2551.

In the commodities market, Brent futures BRN1! rose by 0.3% to $83.21 a barrel, while U.S. crude futures CL1! recorded a similar uptick of 0.35%, reaching $78.39 per barrel. GOLD saw a modest increase of 0.2%, reaching $2,307.15 per ounce. The most-traded June copper contract on the SHFE HG1! was 0.7% down to 81,180 yuan ($11,254.84) per metric ton. SHFE zinc ZNC1! shed 0.2% to 23,330 yuan, tin FTIN1! fell 0.6% to 259,820 yuan, while aluminium ALI1! climbed 0.7% to 20,745 yuan, lead LEAD1! edged 1.4% to 17,575 yuan and nickel NICKEL1! 0.4% to 144,590 yuan.

In agricultural commodities, the soybean contract on the CBOT ZS1! was trading 0.6% down to $12.08 a bushel. Wheat ZW1! lost 1.8% to $6.11-1/4 a bushel and corn ZC1! fell 1% down to $4.56 a bushel.

Looking forward today, UK is Closed for Bank Holiday; EZ Final Composite & Services PMIs (Apr), Sentix (May) Producer Prices (Mar).

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General news - Information source from multiple newswires.

The article and the data is for general information use only, not advice!

The Trade Academy Team