(Bloomberg) — Asian equities are poised for a positive opening Tuesday following gains on Wall Street amid strength in technology stocks and bets for less-aggressive rate hikes from the Federal Reserve.
Stocks edged up in Australia while futures contracts pointed to a rise in Japan, after the Nasdaq 100 had its best two-day rally since November. The S&P 500 gained 1.2%, extending its surge to 12% from an October low.
Australian and New Zealand bonds fell in early Asia trading, echoing moves in Treasuries as traders re-embraced riskier assets. The Australian dollar held overnight gains while the yen steadied after dropping amid the low level of Japanese yields versus those of other developed economies.
The likely advance in Asian shares will be limited to the small number of markets open, with key centers including Hong Kong, Shanghai, Singapore and Seoul still closed for Lunar New Year celebrations.
In the meantime, global investors are focused on central banks and US corporate earnings, with marquee names like Microsoft Corp. and Intel Corp. to report results this week that will help shape the outlook for the sector.
While some traders are bracing for the group’s worst earnings slump since 2016, pessimism has recently faded as tech firms focus on cost cuts and inflation shows signs of easing.
“Markets have leapt ahead this year, driven by China’s reopening, falling energy prices and slowing inflation,” strategists at BlackRock Investment Institute wrote. “This has spurred hopes of a soft economic landing, plummeting inflation and interest rate cuts. We see markets vulnerable to negative surprises – and unprepared for recession.”
Read: S&P 500’s Earnings Growth This Year Is Turning Into a Mirage
Markets have priced in a smaller 25-basis-point hike at the Fed’s Jan. 31-Feb. 1 meeting. Even as several officials say rates must peak above 5% and stay higher for longer, traders remain skeptical.
Among commodities, copper remains near a seven-month high amid optimism China’s abandonment of Covid Zero will fuel demand of the industrial metal that’s key in construction and infrastructure, as well as the new-energy sector. Oil prices fell slightly on rising US stockpiles, while gold edged higher.
Optimism around a less hawkish Federal Reserve, China’s reopening and a weaker dollar is already priced in, according to Morgan Stanley’s strategist Michael Wilson. Nevertheless, he does expect a stock rally in 2024 following a challenging 2023 as the US economy suffers through an earnings recession.
Meanwhile, Treasury Secretary Janet Yellen said she’s encouraged by progress on inflation, with energy prices and supply-chain issues easing across the globe even as the US labor market remains strong.
Key events this week:
- PMIs for US, euro area, UK, Japan, Tuesday
- Richmond Fed Manufacturing, Tuesday
- ECB President Christine Lagarde delivers a video message on “the euro as a guarantee of resilience,” Tuesday
- US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
- US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
- US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 8:21 am Tokyo time. The S&P 500 rose 1.2% on Monday
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 2.2%
- Australia’s S&P/ASX 200 rose 0.2%
- Nikkei 225 futures rose 1%
Currencies
- The euro was little changed at $1.0868
- The Japanese yen rose 0.1% to 130.52 per dollar
- The offshore yuan was little changed at 6.7779 per dollar
- The Australian dollar was little changed at $0.7031
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.51% Monday
- Australia’s 10-year yield advanced four basis points to 3.49%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was unchanged at $1,931.04 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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