Asian shares edge higher, dollar drops

by Jonathan Adams
Dollar drops

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.2% after a 0.9% rise on Monday

Asian shares edged higher on Tuesday while the dollar stayed on the backfoot for a third consecutive session, as heightened expectations of an imminent European rate cut helped whet risk appetite.

Gains were limited ahead of key inflation figures this week.

With debate now shifting to subsequent moves, markets have fully priced in two rate cuts by October this year. That in turn guided Wall Street stock futures higher ahead of the reopening of U.S. markets following a public holiday.

S&P 500 futures gained 0.1% and Nasdaq futures added 0.2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.2% after a 0.9% rise on Monday. Taiwanese shares jumped 0.5% to a record high, while Hong Kong’s Hang Seng index cut some earlier gains to rise 0.1%.

Japan’s Nikkei, on the other hand, slid 0.2%, reversing some of a 0.7% gain a day ago.

We are heading into the northern hemisphere summer season. Traditionally that is a time when markets just tend to get in that drift mode, according to Tony Sycamore, an analyst at IG.

Sycamore believes the Hang Seng has further to run higher after a recent leg up, as data is likely to support further improvements in the Chinese economy. China will release surveys of manufacturing and services activity for May on Friday.

The big risk events this week are not due until Friday when U.S. figures on core PCE and eurozone inflation data will set the tone for trading.

Europe is set for a slightly stronger open, with EUROSTOXX 50 futures 0.2% higher. That would build on gains overnight after a number of European Central Bank officials said the ECB has room to reduce interest rates as inflation slows.

In foreign exchange markets, the dollar was on the back foot for a third consecutive session, last down 0.1% against its major rivals, as traders awaited the PCE release.

The median forecast for April is a 0.3% increase over the previous month, while year-on-year expectations are for a 2.8% jump, with risks on the downside.

The Japanese yen stabilised at 156.78 per dollar, a bit stronger than the key 157 level. It, however, kept weakening against a number of high-yielding currencies, with the New Zealand dollar reaching a new 17-year top of 96.56 yen on Tuesday.

Thanks to the strong carry demand, the kiwi reached a 2-1/2-month high of $0.6155.

The cash Treasuries market returned from a holiday with little movement after taking a hit last week.

Two-year yields dropped 1.6 bps to 4.9375%, having soared 13 basis points the previous week, while the 10-year yield slid 1 basis point to 4.4610%, after increasing 5 basis points the week before.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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