13-6-2023 (HONG KONG) Asian shares experienced a slight uptick in early trading on Tuesday, following a positive session on Wall Street. Investor focus now turns to key U.S. inflation data and the upcoming Federal Reserve’s interest rate decision later this week.
Investors are closely monitoring the release of the U.S. Consumer Price Index (CPI) data on Tuesday and the Producer Price Index (PPI) data on Wednesday to gauge the effectiveness of the Fed’s tightening measures in curbing inflation.
The gains in equity indices partly reflect expectations of a potential pause in the Fed’s tightening cycle for the first time since January 2022, as well as anticipation of lower CPI and PPI figures compared to the previous month, according to investors and strategists.
ANZ analysts noted that “overall equity markets reacted positively to expectations that the monetary policy cycle may be nearing its peak,” adding that U.S. markets are currently pricing in a 72 percent probability that the Federal Reserve Monetary Policy Committee (FOMC) will maintain interest rates at this week’s meeting.
In an effort to stimulate the economy, China’s central bank reduced its seven-day reverse repo rate by 10 basis points to 1.90 percent from 2.00 percent on Tuesday, injecting 2 billion yuan ($279.97 million) through the short-term bond instrument.
Early in the Asian trading day, MSCI’s broadest index of Asia-Pacific shares outside Japan saw a 0.3 percent increase, while U.S. stock futures, represented by the S&P 500 e-minis, rose 0.1 percent.
Japan’s Nikkei advanced by 1.59 percent, while Australian shares experienced a minor decline of 0.03 percent.
China’s blue-chip CSI300 index saw a 0.05 percent increase in early trade, whereas Hong Kong’s Hang Seng index opened with a slight 0.2 percent decline.
On Monday, the S&P 500 and Nasdaq reached their highest closing levels since April 2022. The S&P 500 rose 0.93 percent to close at 4,338.93 points, while the Nasdaq gained 1.53 percent and the Dow Jones Industrial Average rose 0.56 percent.
Although the Fed is expected to maintain steady rates, surprise rate hikes by the Reserve Bank of Australia and the Bank of Canada last week have kept investors cautious about the possibility of prolonged tightening cycles.
The European Central Bank is set to announce its rate decision on Thursday, with analysts expecting a 25 basis points (bps) rate hike and indications that more adjustments may be on the horizon. Meanwhile, the Bank of Japan, expected to reveal its plan on Friday, is anticipated to maintain its ultra-loose monetary policy.
In U.S. Treasuries, the yield on benchmark 10-year Treasury notes stood at 3.7375 percent, slightly lower than the previous U.S. close of 3.765 percent on Monday. The two-year yield, which increases with expectations of higher Fed fund rates, touched 4.5749 percent compared to the U.S. close of 4.592 percent.
Regarding currencies, the U.S. dollar index, measuring the greenback against major currencies, rose 0.019 percent to 103.600, while the euro gained 0.1 percent against the dollar, reaching $1.0762. The dollar experienced a slight 0.05 percent drop against the yen, trading at 139.52.
U.S. crude oil saw a marginal increase of 0.15 percent, reaching $67.22 per barrel, while Brent crude rose to $72.01 per barrel.
Gold prices slightly rose, with spot gold trading at $1959.29 per ounce.
