Asian shares rose on Monday as bond markets paused ahead of an update on the US rate outlook and a job report from the world’s toughest central bank that could decide whether the next super-sized hike is needed.
Disappointment ran through the markets when China set its growth outlook at a 5.3% target instead of the preferred 5.6%. However, with the newest real data being comparatively strong, investors were retained in a positive mood. In contrast, Chinese blue chips declined by 0.8% after soaring 1.6% from the previous week, but MSCI’s index of Asia-Pacific stocks outside Japan went up 0.2%.
Japan’s Nikkei rose 1.3% to a three-month high, while South Korean shares rose 0.6%, helped by softer inflation estimates. EURO STOXX 50 futures fell 0.2%, while the FTSE fell 0.1%. S&P 500 and Nasdaq futures were flat after gains on Friday as bond yields edged lower.
10-year Treasuries yielded 3.958% after last week’s rally to 4.09% proved too tempting to attract buyers.
Markets are bracing for a rate hike from the Federal Reserve, which is expected to remain in quarterly moves rather than a half-point increase.
On Saturday, Mary Daly, President of the San Francisco Fed, reiterated that rates ought to increase but put a high bar for switching to a 0.5-point rise.
However, much may depend on what the February payroll report reveals on Friday. Forecasts are mobilizing for a more modest increase of 200,000 after January’s jump of 517,000, but risks are to the upside.
The euro held steady at $1.0628, off a seven-week low of $1.0534, while the dollar index was fractionally firmer at 104.620.
A drop in bond yields on Friday helped gold recover somewhat, trading at $1,856 an ounce.
Oil prices have fallen, and investors may be disappointed that China has not set more ambitious growth targets.
European markets edged to a positive open, while Asia-Pacific stocks were mixed as investors bought further shares on expanding China.
Wednesday will feature congressional testimony from Fed Chairman Jerome Powell, giving investors a better idea of what the central bank thinks about inflation and the trend toward higher rates.
European markets are heading for a positive start to the new trading week.
UK’s FTSE 100 index should open up 1 point to 7950, Germany’s DAX up 49 points to 15635.
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