1-8-2023 (TOKYO) Asian stocks advanced, edging toward a sixteen-month peak on Tuesday, while oil held near recent highs, as investors found more reasons for optimism over the global economic outlook. Despite some lingering risks, positive data and central bank actions have bolstered market sentiment.
The US dollar reached a three-week high against the yen as investors sought clarity on the Bank of Japan’s recent adjustments to its yield curve control and how that might impact monetary policy.
The Aussie dollar eased slightly ahead of a central bank policy decision, with traders giving about a 30 per cent chance of a quarter-point rate hike.
MSCI’s broadest index of Asia-Pacific shares rose by 0.25 per cent, nearing Monday’s high, which was its strongest level since April of the previous year.
The Hang Seng surged 0.84 per cent, with a tech subindex gaining nearly 2 per cent, while Japan’s Nikkei rose by 0.59 per cent.
U.S. E-mini stock futures indicated a 0.1 per cent rise after the S&P 500 slightly increased by 0.15 per cent overnight.
In Europe, signs of peaking inflation echoed the narrative in the United States, suggesting that major central banks may be nearing the end of their tightening cycles.
Despite a surprise contraction in China’s manufacturing sector in a private-sector survey released on Tuesday, investors focused on Beijing’s stimulus efforts to support the post-pandemic recovery.
Tony Sycamore, a markets analyst at IG in Sydney, described the current economic climate as a “kind of economic nirvana,” with a resilient economy, solid earnings reports, and cooling inflation.
However, this positive outlook will be tested this week with several closely-watched jobs reports due in the United States, culminating with the monthly payrolls report on Friday. Additionally, global bellwether Caterpillar’s corporate earnings announcement later on Tuesday will be closely monitored.
The U.S. dollar index, which measures the currency against six major peers, rose by 0.2 per cent, reaching 102.07 for the first time since July 10.
The Japanese yen continued to retreat, with the dollar gaining as much as 0.37 per cent, reaching a three-week high of 142.80 yen. Japan’s benchmark 10-year yield hovered around 0.6 per cent, remaining far from the new de facto cap at 1 per cent.
The Australian dollar weakened by 0.34 per cent to $0.66955, placing it in the middle of its trading range over the past week.
In the cryptocurrency market, bitcoin slipped by 0.9 per cent to $28,965, touching its lowest level since June 21 at $28,726.
Crude oil slightly eased after ending July at fresh three-month highs, supported by signs of tightening global supply and rising demand for the rest of the year.
U.S. West Texas Intermediate crude futures fell by 0.3 per cent to $81.54 a barrel after reaching $82.00 in the previous session for the first time since mid-April.
