- Asian stock markets:
- The Nikkei reaches a high, the S&P futures a fraction of that
- Dollar slips below 7.2000 yuan after firm PBOC fixing
- Fed minutes, European PMIs and Nvidia results will be presented this week
SYDNEY, Nov 20 (Portal) – Japanese stocks hit highs not seen since 1990 on Monday as strong earnings and offshore demand fueled a three-week winning streak, while the yuan was boosted by China’s central bank, sparking a general weakening of the dollar.
Japan’s Nikkei (.N225) saw profit-taking at its peak but is still up 8.2% for the month so far, while the Topix (.TOPX) was not far behind.
Financial stocks led gains on Monday as investors braced for a possible end to negative interest rates, while automakers benefited from a weak yen and strong exports.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 0.8% after rising 2.8% to a two-month high last week.
Black Friday sales will test the pulse of the consumer-focused U.S. economy this week, while the Thanksgiving holiday will keep markets thin.
There have been media reports that Israel, the United States and Hamas had reached a tentative agreement to release dozens of hostages in Gaza in return for a five-day pause in fighting, but no confirmation yet.
Chinese blue chips (.CSI300) fell 0.2% as the country’s central bank kept interest rates steady as widely expected but pegged the yuan firmly, sending the dollar below 7.2000 to a three-month low.
EUROSTOXX 50 futures remained stable while FTSE futures were slightly firmer.
S&P 500 futures fell 0.15% and Nasdaq futures lost 0.35%. The S&P is now up nearly 18% for the year and less than 2% from its July peak.
Still, analysts at Goldman Sachs note that the “Magnificent 7” mega-cap stocks have returned 73% year to date, compared to just 6% for the remaining 493 companies.
“We expect mega-cap technology stocks to continue to outperform due to their above-average expected revenue growth, margins, reinvestment ratios and balance sheet strength,” they wrote in a note. “But the risk-reward profile is not particularly convincing given the increased expectations.”
Tech giant Nvidia (NVDA.O) reports its quarterly results on Tuesday and all eyes will be on demand for its AI-related products.
U.S. economic data is stalling this week, but minutes from the Federal Reserve’s latest meeting will add some color to the thinking of policymakers who have kept interest rates steady for a second time.
LOTS OF PRICE IN
Markets have all but priced in the risk of another rate hike in December or next year, estimating a 30 percent chance of easing from March. Futures also point to cuts of around 100 basis points for 2024, down from 77 basis points before October’s benign inflation report rocked markets.
That outlook helped bonds recover, with 10-year Treasury yields at 4.45%, after falling 19 basis points last week, moving away from October’s peak of 5.02%.
It also pushed the U.S. dollar down nearly 2% against a basket of currencies last week and helped the euro rise to $1.09365 after rising 2.1% last week.
The dollar actually lost ground against the low-yielding yen, last losing 0.5% at 148.89, below its recent peak of 151.92. Expectations of another strong round of wages and a high reading for core inflation later this week have led to further talk of possible tightening by the Bank of Japan.
Futures data showed that speculative accounts had extended their short yen positioning to the highest level since April 2022, suggesting there is a risk that these positions could be squeezed out.
Closely watched European manufacturing surveys are due this week, and any hint of weakness will prompt more bets and imminent interest rate cuts from the European Central Bank.
“These surveys will be very important given the recent sharp deterioration in the eurozone services sector,” NAB analysts said. “If there is another soft print, it is to be expected that the prices for ECB cuts will go beyond the cuts of 100 basis points currently priced in for 2024.”
Markets believe there is around a 70 percent chance of easing as early as April, although many ECB officials are still talking about the need to keep monetary policy tighter for longer.
Sweden’s central bank meets this week and could hike again given high inflation and the weakness of its currency.
In commodity markets, oil prices rebounded from four-month lows on Friday amid speculation that OPEC+ will extend or increase its production cuts at a meeting on November 26
Brent rose 58 cents to $81.19 a barrel, while U.S. crude rose 49 cents to $76.38 a barrel.
Gold prices were slightly firmer at $1,982 an ounce, after rising 2.2% last week.
Reporting by Wayne Cole; Edited by Lincoln Feast
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