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Asian shares firmed on Monday as investors braced for a busy run of inflation data that could set the scene for a European rate cut as soon as next week and a US policy easing within just a few months, Reuters reported. Holidays in Britain and the United States made for thin trading ahead of Friday’s figures on core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation. Median forecasts are for a rise of 0.3 percent in April, keeping the annual pace at 2.8 percent, with risks on the downside.
Figures for inflation in the euro zone are also due on Friday and an expected tick up to 2.5 percent should not stop the European Central Bank (ECB) from easing policy next week. Policy makers Piero Cipollone and Fabio Panetta both flagged a coming cut over the weekend, while markets imply an 88 percent chance of an easing to 3.75 percent on June 6. The ECB’s chief economist told the Financial Times newspaper that the central bank was ready to start cutting, but policy would still need to be restrictive this year. The Bank of Canada might also ease next week, while the Fed is seen waiting until September for its first move. At least eight Fed officials are due to speak this week, including two appearances by the influential head of the New York Fed John Williams.
The head of the Bank of Japan (BOJ) said on Monday it would proceed cautiously with inflation-targeting frameworks, adding that some challenges were “uniquely difficult” for Japan after years of ultra-easy monetary policy. The BOJ holds its policy meeting on June 14 and there is some chance it may buck the global trend and hike rates again, albeit to a modest 0.15 percent.
The prospect of lower borrowing costs across much of the globe has been positive for equities and commodities, though many markets did run into profit-taking last week. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6 percent, having slipped 1.5 percent last week and away from a two-year peak. Taiwan stocks reached a record, having climbed more than 7 percent for the month so far on a tide of tech bullishness. Japan’s Nikkei rose 0.5 percent, ahead of a reading on Tokyo consumer prices later in the week. Chinese blue chips firmed 0.4 percent, with the major release this week being surveys of manufacturing and services for May on Friday.
EUROSTOXX 50 futures eased 0.1 percent, while trade in FTSE futures was closed. S&P 500 futures dipped 0.1 percent, as did Nasdaq futures. The Nasdaq hit record highs last week after Nvidia beat expectations. Indeed, Nvidia alone has accounted for a quarter of the S&P 500’s gains this year, while the “Magnificent Seven” tech darlings are up 24 percent for the year.
Gold was holding at $2,342 an ounce, having recoiled 3.4 percent last week and off an al-time peak of $2,449.89.
Oil prices were stuck near four-month lows amid concerns about demand as the US driving season gets underway this week. Brent was up 20 cents at $82.32 a barrel, while US crude rose 27 cents to $77.99 per barrel.