MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.7 per cent, having already surged 2.8 per cent last week and away from one-year lows
Asia shares soared for a fourth consecutive session on Monday after markets moved to price in earlier rate cuts in the US and Europe, bullish wagers that will be tested by a number of central bank speakers this week.
Battered bond markets also experienced recovery as a benign U.S. payrolls report and upbeat productivity data indicated the labour market was cooling enough to obviate the need for further rate hikes from the Fed.
This year’s better-than-expected U.S. supply-side performance raises hopes for a soft landing, according to Bruce Kasman, head of economic research at JPMorgan.
By encouraging disinflation, strong productivity and labour supply gains might permit for job growth and low inflation to coexist, Kasman said. This, in turn, would open the path for early Fed easing.
Futures markets swung to imply a 90 per cent possibility the Fed was done raising, and an 86 per cent possibility the first policy easing would come in June.
Central bankers have their own chance to weigh in on this dovish outlook with at least nine Fed members speaking this week, including Chair Jerome Powell. Also on the docket are speakers from the Bank of England and European Central Bank.
An odd one is Australia’s central bank, which is considered likely to resume raising rates at a policy meeting on Tuesday as inflation stays high.
The BoJ is also on the road to tightening, albeit at a slow pace. The head of the central bank on Monday said they were closer to achieving their inflation target, but it was still not enough to end ultra-loose policy.
Elsewhere, hopes for lower borrowing costs helped MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.7 per cent, having already surged 2.8 per cent last week and away from one-year lows.
Japan’s Nikkei gained another 2.5 per cent, after climbing 3.1 per cent last week, while South Korea jumped 3.9 per cent as authorities re-imposed a ban on short-selling to mid-2024.
Chinese blue chips added 0.8 per cent, ahead of data on trade and inflation due later this week.