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Global equity/currency market update: Asian Shares Gain Ahead of Crucial U.S. Inflation Report

27 May 2024 8:39 am
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Mumbai, 27 May (Commoditiescontrol): Asian shares edged higher on Monday as investors prepared for a significant week of economic data, culminating in a key U.S. inflation report that could influence future interest rate cuts. However, changes in U.S. rates are not expected for several months. With holidays in the United States and UK, trading was thin ahead of Friday's core personal consumption expenditures (PCE) data, the Federal Reserve’s preferred inflation gauge. Forecasts predict a 0.3% rise in April, maintaining the annual rate at 2.8%, with potential downside risks.

Inflation figures from the eurozone are also due on Friday, with an expected increase to 2.5%, which is unlikely to deter the European Central Bank (ECB) from easing policy next week. ECB policymakers Piero Cipollone and Fabio Panetta signaled a forthcoming cut, and market indicators suggest an 88% probability of a rate reduction to 3.75% on June 6. The Bank of Canada might also ease next week, while the Federal Reserve is expected to wait until September for its first move.

This week, at least eight Fed officials, including New York Fed President John Williams, are scheduled to speak. The Bank of Japan (BOJ) also indicated caution in its inflation-targeting approach, with a policy meeting set for June 14. There is a slight chance the BOJ may hike rates to a modest 0.15%, diverging from the global trend.

The prospect of lower global borrowing costs has buoyed equities and commodities, though many markets experienced profit-taking last week. The MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.4%, having dropped 1.5% last week. Taiwan stocks hit a record high, climbing over 7% for the month on tech optimism. Japan's Nikkei rose 0.3% ahead of Tokyo's consumer price data release. Chinese blue chips increased by 0.2%, with manufacturing and services surveys due Friday. EUROSTOXX 50 futures eased 0.1%, while FTSE futures were closed.

U.S. markets saw S&P 500 futures dip 0.1%, and Nasdaq futures also fell 0.1%. The Nasdaq reached record highs last week after Nvidia's strong performance. Nvidia has significantly contributed to the S&P 500’s gains this year, alongside the "Magnificent 7" tech stocks, up 24% year-to-date.

In currency markets, focus remained on the yen amid potential Japanese intervention. The dollar stood at 156.78 yen, close to its recent peak of 160.245. The euro was steady at $1.0845. Gold held at $2,340 an ounce, having fallen 3.4% last week from its all-time high of $2,449.89.

Oil prices hovered near four-month lows due to demand concerns as the U.S. driving season begins. Investors await the OPEC+ meeting on June 2 to see if new production cuts will be discussed, though consensus is uncertain. Brent crude rose 18 cents to $82.30 per barrel, and U.S. crude increased 23 cents to $77.95 per barrel.

(By Commoditiescontrol Bureau: 09820130172)

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