- Asian Stock Market:
- Nikkei flat, S&P futures shares lower
- Fed minutes, European PMI, Nvidia results to appear this week
- Markets pricing in early, aggressive rate cuts globally
SYDNEY, Nov 20 (Reuters) – Japanese shares hit highs not seen since 1990 on Monday as strong earnings and offshore demand fueled a three-week winning streak, while other Asian markets approach U.S. rates. But were more mixed with fixed eyes.
Japan’s Nikkei (.N225) added another 0.6% to eclipse its September peak and bring its gains for the month so far to 9.3%.
Financial stocks rose on Monday as investors finally prepared for the end of negative rates, while auto makers benefited from a weaker yen and higher exports.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.1%, having climbed 2.8% last week to a two-month high.
Black Friday sales will test the pulse of the consumer-driven US economy this week, while the Thanksgiving holiday will make for thinner markets.
There were media reports that Israel, the United States and Hamas had reached a temporary agreement to free dozens of hostages in exchange for a five-day pause in fighting in Gaza, but there has been no confirmation yet.
S&P 500 futures fell 0.1% and Nasdaq futures lost 0.2%. The S&P is now up nearly 18% for the year and less than 2% off its July peak.
Yet Goldman Sachs analysts say the “Magnificent 7” mega-cap stocks have returned 73% so far this year, compared with just 6% for the remaining 493 firms.
“We expect mega-cap tech stocks to continue to outperform given their better-than-expected sales growth, margins, reinvestment ratios and balance sheet strength,” he wrote in a note. “But the risk/reward profile is not particularly attractive given the high expectations.”
Tech major Nvidia (NVDA.O) will report quarterly earnings on Tuesday and all eyes will be on the demand situation for its AI-related products.
The flow of US economic data has slowed this week, but minutes from the Federal Reserve’s last meeting will shed some color on policymakers’ thinking as they kept rates steady for the second time.
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Markets have largely discounted the risk of further hikes in December or next year, and there is a 30% chance of a tapering start in March. Futures also indicate cuts of about 100 basis points for 2024, up from 77 basis points before the benign October inflation report, which spooked markets.
That outlook helped the bond rally, with 10-year Treasury yields falling 19 basis points last week to 4.45% and shy of October’s high of 5.02%.
This dragged the US dollar down about 2% among a basket of currencies and helped the euro jump 2.1% last week to $1.0900.
The dollar also lost ground against the low-yielding yen, last trading at 149.88 and down from its recent top of 151.92. Futures data showed that speculative accounts increased their short yen positions to the highest level since April 2022, suggesting those positions could be squeezed.
Closely watched surveys of European manufacturing are due this week and any sign of weakness would encourage more betting and initial rate cuts by the European Central Bank.
“These surveys will be very important given the sharp decline seen recently in the euro area services sector,” NAB analysts said. “If another soft print occurs, the expectation is that pricing for ECB cuts will move beyond the current 100bps cut scheduled for 2024.”
The market sees about a 70% chance of easing by April, even though many ECB officials are still talking about the need to keep policy tight for longer.
Sweden’s central bank meets this week and could hike again given high inflation and the weakness of its currency.
In commodity markets, oil jumped from a four-month low on Friday amid speculation OPEC+ would extend or extend its production cuts next year.
Brent rose 2 cents to $80.63 a barrel, while U.S. crude gained 5 cents to $75.94 a barrel.
Gold was slightly lower at $1,977 an ounce, having climbed 2.2% last week.
Reporting by Wayne Cole; Editing by Lincoln Fest.
Our Standards: The Thomson Reuters Trust Principles.
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