Asian stocks relieved by mood swings, hurdles to overcome

SYDNEY (Reuters) – Asian stocks enjoyed a rally of relief on Monday as record highs on Wall Street and the easing of policy in China helped calm some of the recent global growth nervousness, although many potential pitfalls await us this week.

In the United States, inflation data could be scary ahead of Federal Reserve Chairman Jerome Powell’s testimony on Wednesday and Thursday, where markets will be hypersensitive to any discussion of an early cut.

The earnings season also kicks off with JP Morgan, Goldman, Citigroup and Wells Fargo among those reporting.

China is releasing figures on economic growth, trade, retail sales and industrial production this week amid concerns they could disappoint given the sudden easing of policy last week.

“Expectations for China’s outlook have deteriorated over the past month due to some disappointing partial data compounded by the prospect of peak growth resulting from the pandemic recovery,” Westpac analysts said in a statement. note.

“However, annual growth is still expected to be above 8.0% and, through the second half of 2022, the quarterly growth momentum is expected to firm up to return to trend.”

For now, investors were happy that last week’s bearish jump had turned to New York, pushing Wall Street higher and tempering the uptrend in bonds.

On Monday, the largest MSCI index of Asia-Pacific equities excluding Japan gained 0.7%, after losing 2.3% last week.

Japan’s Nikkei rebounded 2.2%, and away from a two-month low hit on Friday, while South Korea added 0.9%. Chinese blue chips rose 1.1%.

Futures on the Nasdaq and the S&P 500 were a little easier after their rally on Friday. EUROSTOXX 50 futures were flat, while FTSE futures were down 0.2%.

US 10-year bond yields held steady at 1.35%, after dropping as low as 1.25% on Friday after eight consecutive sessions of price increases. [US/]

“The rise in US rates in July was remarkable,” NatWest Markets analysts noted. “No engine fully explains the move … but fears about global growth and the Covid Delta variant had raised new doubts about inflation.”

This bout of risk aversion also supported the safe haven US dollar until it hit profit taking on Friday. It was last at 92.190 on a basket of currencies, after hitting a three-month high of 92.844 last week.

The safe haven yen also lost ground to 110.16 per dollar, while the euro strengthened to $ 1.1869 from last week’s low of $ 1.1780.

European Central Bank President Christine Lagarde took the markets by surprise on Monday, saying the bank would change its policy stance at its next meeting and show it was serious about reviving inflation.

The ECB’s new strategy allows it to tolerate inflation above its 2% target when rates are close to their lowest.

The general risky mood helped gold move higher last week and it was trading at $ 1,800 an ounce from its June low of $ 1,749.

Oil prices stabilized on Monday after ending a volatile week with a rebound as US stocks tightened. Dealers are still uncertain about the supply outlook after OPEC talks on the restrictions break down.

Brent fell 18 cents to $ 75.37 a barrel, while US crude fell 16 cents to $ 74.40.