(Bloomberg) — Asian equities climbed Tuesday following gains on Wall Street amid strength in technology stocks and bets for less-aggressive rate hikes from the Federal Reserve.
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A benchmark of Australian shares rose 0.3% and Japan’s Topix index rallied about 1% while many other markets in the region remained closed for Lunar New Year celebrations. The positive tone for riskier assets was carried over from the US on Monday, when the tech-heavy Nasdaq 100 had its best two-day rally since November and the S&P 500 extended its surge to 12% from an October low.
Australian and New Zealand bonds fell, echoing moves in Treasuries overnight. US yields were little changed in early Asian trading.
The Australian dollar held gains from Monday while the yen steadied after dropping, reflecting ebbing demand for havens and the low level of Japanese yields versus those of other developed economies. Japanese bond futures fell after a week-long stretch of gains.
With key centers including Hong Kong, Shanghai, Singapore and Seoul closed, much of the focus among global investors Tuesday is on central banks and US corporate earnings. Marquee names like Microsoft Corp. and Intel Corp. report results this week that will help shape the outlook for the technology sector.
Some traders are bracing for the group’s worst earnings slump since 2016 while others have been encouraged by cost cuts and inflation showing 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
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.
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.
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.
Elsewhere in markets, oil steadied as traders awaited fresh signals on the state of Chinese crude demand after the nation ditched Covid curbs.
Gold reversed losses, with traders awaiting more US data that may shed light on the path of Fed rate hikes.
Key events this week:
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PMIs for US, euro area, UK, Japan, Tuesday
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Richmond Fed Manufacturing, Tuesday
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ECB President Christine Lagarde delivers a video message on “the euro as a guarantee of resilience,” Tuesday
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US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
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US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
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US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.1% as of 9:24 am Tokyo time. The S&P 500 rose 1.2% on Monday
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Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 2.2%
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Australia’s S&P/ASX 200 rose 0.3%
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Japan’s Topix rose 1%
Currencies
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Bloomberg Dollar Spot Index was little changed at 1,224.50
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The euro was little changed at $1.0874
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The Japanese yen rose 0.1% to 130.50 per dollar
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The offshore yuan was little changed at 6.7744 per dollar
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The Australian dollar was little changed at $0.7033
Cryptocurrencies
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Bitcoin fell 0.2% to $22,959.98
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Ether fell 0.2% to $1,628.30
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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