(Bloomberg) — Asian stocks gained in early trading, as a softer reading of the Federal Reserve’s preferred measure for inflation bolstered rate-cut hopes.
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Equities in Australia and Japan opened higher on Monday, with futures also pointing to gains in Hong Kong. Elections in major emerging markets will help set the tone, with Indian stocks, bonds and the rupee poised to climb after exit polls indicated a resounding victory for Prime Minister Narendra Modi’s party. In Mexico, the peso was quoted higher with the polls still open.
The gains in Asian shares come after they advanced 1.5% in May, aided by signs of stabilization in China’s economy and a weaker dollar. But politics may inject volatility, with tensions surrounding the Middle East and the US election simmering, according to AMP Ltd.
“We continue to see further gains in shares this year as disinflation continues, central banks ultimately cut interest rates and recession is avoided or proves mild,” said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney. “But the risks of a deeper correction beyond that seen in April have increased.”
Oil slipped in early trading after OPEC+ extended its production cuts in efforts to bolster a fragile market. While the deal exceeded market expectations, it also rolls back those supply reductions in October, earlier than some OPEC-watchers had assumed.
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The dollar was steady in early trading. Australian bond yields edged lower, while 10-year Treasuries were little changed.
The Fed’s preferred measure of inflation, the core personal consumption expenditures price gauge, met estimates on Friday and posted the smallest increase this year. Inflation-adjusted consumer spending unexpectedly fell 0.1%, dragged down by a decrease in outlays for goods and softer services spending. Wage growth, the primary fuel for demand, moderated.
“While this is unlikely to be enough to justify an imminent Fed rate cut, we think recent data continue to underpin our base case soft landing scenario,” Solita Marcelli, chief investment officer for the Americas at UBS Group AG’s wealth management unit, wrote in a note. “This should allow the US central bank to start policy easing later this year, most likely at its September meeting, in our view.”
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Meantime, Saudi Aramco’s $12 billion share sale sold out shortly after the deal opened on Sunday, in a boon to the government that’s seeking funds to help pay for a massive economic transformation plan. While it wasn’t immediately clear how much of the demand came from overseas, the order book reflected a mix of local and foreign investors, people familiar with the matter told Bloomberg News.
This week, traders will be closely watching inflation prints across emerging markets including Indonesia, South Korea and Chile, as well as growth data in Australia and Europe. Economic activity data is also due in Europe ahead of the ECB’s rate decision, and the US jobs report is released on Friday.
Some key events this week:
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China Caixin manufacturing PMI, Monday
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Indonesia CPI, Monday
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India S&P Global Manufacturing PMI, Monday
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Eurozone S&P Global Manufacturing PMI, Monday
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UK S&P Global / CIPS Manufacturing PMI, Monday
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US construction spending, ISM Manufacturing, Monday
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International Atomic Energy Agency board meets in Vienna, Monday
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South Korea CPI, Tuesday
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Germany unemployment, Tuesday
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South Africa GDP, Tuesday
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Brazil GDP, Tuesday
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US factory orders, JOLTS, Tuesday
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Australia GDP, Wednesday
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South Korea GDP, Wednesday
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China Caixin services PMI, Wednesday
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Eurozone S&P Global Services PMI, PPI, Wednesday
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Canada rate decision, Wednesday
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Eurozone retail sales, ECB rate decision, Thursday
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China trade, forex reserves, Friday
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Eurozone GDP, Friday
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Mexico CPI, Friday
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Chile copper exports, trade, CPI, Friday
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US unemployment rate, nonfarm payrolls, wholesale inventories, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.2% as of 9:09 a.m. Tokyo time
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Hang Seng futures rose 0.4%
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Japan’s Topix rose 1%
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Australia’s S&P/ASX 200 rose 0.8%
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Euro Stoxx 50 futures fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0852
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The Japanese yen was little changed at 157.27 per dollar
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The offshore yuan was little changed at 7.2621 per dollar
Cryptocurrencies
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Bitcoin was little changed at $67,749.2
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Ether fell 0.2% to $3,777.22
Bonds
Commodities
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West Texas Intermediate crude fell 0.3% to $76.78 a barrel
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Spot gold fell 0.1% to $2,324.93 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess.
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