Market action was slow on account of Friday’s unexpectedly strong business activity surveys which strengthened the case for higher rates
Shares in Asia were mainly down on Monday in a week full of economic data and central bank meetings, together with earnings from the tech leaders that have kept the S&P 500 afloat so far in 2023.
Market action was slow on account of Friday’s unexpectedly strong business activity surveys which strengthened the case for higher rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.4 per cent, while Nikkei rose 0.2 per cent. Chinese blue chips dropped 0.4 per cent.
Over in Australia, mining stocks were down following Chile’s move to bolster state control over its lithium industry, which has the world’s biggest reserves of lithium.
EUROSTOXX 50 futures and FTSE futures were almost unchanged. S&P 500 futures and Nasdaq futures declined 0.3 per cent prior to a busy week of earnings.
Apple Inc and Microsoft Corp alone have accounted for around half of the S&P 500’s advances during March, so there is much riding on their outlooks.
We think Microsoft, Amazon and Google should all deliver cloud results that meet and probably surpass Street 1Q predictions this week in spite of recent noise in the market, according to analysts at Wedbush Securities.
We also think an important narrative of tech earnings season will be the artificial intelligence arms race and every Big Tech player updating investors on their own artificial intelligence ambitions/monetization strategy as Redmond battles tech giants for the artificial intelligence trophy case.
U.S. wages and economic growth data due this week will probably strengthen the case for more tightening. The Atlanta Fed’s GDP Now tracker shows the U.S. economy growing at an annualised 2.5 per cent in Q1, only a bit slower than the earlier quarter.
Markets are pricing in an 86 per cent possibility the U.S. Fed will raise rates by a quarter point at its May meeting, and fully expect a similar raise from the ECB with some risk of a half-point move.
The focus will be on the BoJ for the first meeting chaired by its new governor, Kazuo Ueda.
Ueda on Monday said policy easing had to be ongoing as inflation was still below 2 per cent in trend terms.
Media background suggests no changes to yield curve control, but the risk is of more significant change at the next meeting, according to Tapas Strickland, head of market economics at NAB.
On the contrary, the head of Belgium’s central bank cautioned on Monday that investors are underrating how high eurozone borrowing costs will increase.
The divergence in policy between Japan and the rest of the developed world has seen the yen weaken steadily during the past few weeks, with the euro especially reaching a six-month high.