Asian stocks extend global rally; Oil Advances: Market Recap

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(Bloomberg) – Asian stocks extended a rally in global equities that continues to defy concerns about risks to economic growth and high interest rates. Oil jumped following a cut in supply from Saudi Arabia.

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Crude jumped more than 3% before scaling back after pledging to cut another 1 million barrels a day in July, pushing Saudi Arabia’s production down to multi-year lows .

Stock indices in Japan and Australia advanced more than 1% on Monday while South Korea’s Kospi rose around 0.4%. Hong Kong stocks opened slightly higher before falling slightly, along with the main Shanghai index.

Contracts for the S&P 500 fell slightly in Asia after fresh gains on Friday brought the underlying measure to the cusp of a bull market. An MSCI Inc. gauge of developed and emerging market stocks is at its highest since May, despite growing worries about an economic slowdown in China and the prospect of higher interest rates in the United States.

Gains in the U.S. on Friday were fueled by big tech, options positioning and bets that a Fed will keep rates unchanged this month ahead of a likely July hike.

A mixed jobs report shaped Fed bets, with signs of a labor market slowdown in May despite a pickup in hiring. That bolstered the argument of Fed Chairman Jerome Powell and other officials that they should take more time to assess incoming data and changing prospects before raising rates again.

Two-year Treasury yields, which are more sensitive to impending central bank moves, rose five basis points, adding to a 16 basis point increase on Friday. Yields on Australian three-year government bonds jumped about 11 basis points after the move in Treasuries and ahead of a central bank rate decision on Tuesday.

A measure of dollar strength was slightly higher, partly reflecting higher US yields. The euro, pound and Australian dollar declined while the yen weakened past 140 against the greenback.

As stocks rose in the United States on Friday, Wall Street’s “fear gauge” fell to pre-pandemic levels. The Cboe Volatility Index, or VIX, fell below 15 from an average of 23 last year.

Broadcom Inc. climbed after predicting AI-related sales would double this year.

“The impressive run in stocks continues to draw retail investors into the market,” said Mark Hackett, head of investment research at Nationwide. “Investors have spent much of the past three years obsessing over the Fed, inflation and payrolls, although volatility around these reports has subsided, reflecting a less emotional market. This is bullish because less responsiveness is a sign of a healthy market.

The rise in stocks doesn’t mean the market isn’t facing headwinds, according to Quincy Krosby, chief global strategist at LPL Financial.

Among the risks, she cites the potential ramifications of the deluge of Treasuries – around $1 trillion – to be auctioned off as the US Department replenishes its general account following a debt limitation agreement. this could trigger a major undermining of financial market liquidity, she noted.

Key events this week:

  • China Caixin Services PMI, Monday

  • Eurozone S&P Global Eurozone Services PMI, PPI, Monday

  • US Factory Orders, ISM Services, Monday

  • ECB President Christine Lagarde during her appearance before the European Parliament on Monday

  • Tariff decisions in Australia and Poland, Tuesday

  • China’s foreign exchange reserves, trade, Wednesday

  • U.S. Trade, Consumer Credit, Wednesday

  • Canadian rate decision, Wednesday

  • EIA Crude Oil Inventory Data, Wednesday

  • Eurozone GDP, Thursday

  • Tariff decisions in India and Peru, Thursday

  • Japan’s GDP, Thursday

  • U.S. wholesaler inventories, first jobless claims, Thursday

  • China PPI, CPI, Friday

Some of the major movements in the markets:

Shares

  • S&P 500 futures fell 0.1% at 10:32 a.m. Tokyo time. The S&P 500 rose 1.4% on Friday

  • Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 0.7%

  • Euro Stoxx 50 futures fell 0.2%

  • Japan’s Topix rose 1.2%

  • Australia’s S&P/ASX 200 rose 1.1%

  • Hong Kong’s Hang Seng fell 0.2%

  • The Shanghai Composite fell 0.1%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%

  • The euro fell 0.1% to $1.0694

  • The Japanese yen was little changed at 140.05 to the dollar

  • The offshore yuan fell 0.1% to 7.1184 to the dollar

  • The Australian dollar fell 0.3% to $0.6591

Cryptocurrencies

  • Bitcoin fell 0.7% to $27,046

  • Ether fell 1.2% to $1,882.23

Obligations

  • The yield on 10-year Treasury bills rose three basis points to 3.72%

  • The Japanese 10-year rate rose 1.5 basis points to 0.425%

  • The Australian 10-year yield rose 10 basis points to 3.74%

Goods

This story was produced with assistance from Bloomberg Automation.

–With the help of Rita Nazareth.

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