Asia shares at seven-month peak as China talks stimulus
Asian shares inched up to seven-month highs on Monday as investors cheered a rebound in U.S. payrolls and hints of more stimulus in China, though there was some caution ahead of what is likely to be a tough U.S. earnings season.
In a document published on the central government’s website late on Sunday, Beijing said it would step up a policy of targeted cuts to banks’ required reserve ratios to encourage financing for small and medium-sized businesses.
Chinese blue chips climbed 1.4 percent to territory not visited since March last year. MSCI’s broadest index of Asia-Pacific shares outside Japan followed by gaining 0.4 percent to its highest since August.
Japan’s Nikkei also made its high of the year so far and was last up 0.1 percent. E-Mini futures for the S&P 500 were little moved.
On Wall Street, the benchmark S&P 500 closed higher for its seventh trading day in a row last week, the longest winning streak since October 2017. [.N]
However, a test looms as major U.S. banks kick off what analysts expect to be the first quarter of contracting corporate earnings since 2016.
JPMorgan Chase & Co and Wells Fargo & Co will get the ball rolling on Friday.
Minutes of the Federal Reserve’s last policy meeting are due out on Wednesday.
“Markets will be looking at just how dovish the FOMC has become,” wrote analysts at TD Securities in a note. “We put a very low but not zero chance on a rate cut discussion; conversely rate hikes are still on the horizon for the majority of Fed officials.”
“The minutes are likely to show peak dovishness in terms of nervousness about the outlook.”
There was a huge sigh of relief globally on Friday when the U.S. payrolls report showed a solid 196,000 rise in jobs in March, while annual wage growth slowed a little to 3.2 percent.
“This data assuages both the downside and upside fears,” said Alan Ruskin, global head of G10 FX Strategy at Deutsche Bank. “Fears of soft growth are assuaged. On the upside, the wage data does not point to further acceleration that would threaten inflation.”
“It plays to idea that the U.S. economy remains reasonably robust, and does not justify any rate cut expectations over say the next six months, and is to that extent going to play to buying U.S. dollar dips versus the majors.”
The dollar was flat at 97.329 against a basket of currencies on Monday, but remained short of the March peak at 97.710 which marks major chart resistance.
The dollar held its recent gain on the Japanese yen at 111.52, but again needs to clear the March top of 112.12 to spark a true uptrend.
The euro has been undermined by a string of dismal data out of Europe and idled at $1.1218 not far from its recent 20-month trough at $1.1174.
Sterling had troubles of its own at $1.3046 as time ticks away to Britain’s departure from the European Union on April 12, with no deal agreed.
Prime Minister Theresa May must come up with a new plan to secure a delay from EU leaders at a summit on Wednesday.
In commodity markets, spot gold was a fraction firmer at $1,296.31 per ounce.
Oil prices rose to their highest levels since Nov. 2018, driven by OPEC’s ongoing supply cuts and U.S. sanctions against Iran and Venezuela.
U.S. crude was last up 38 cents at $63.46 a barrel, while Brent crude futures rose 39 cents to $70.73.