Japan Is Expected to Provide Asian Stocks a Boost, as the Yen Depreciates

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Asian stocks appeared ready to rise early Monday as traders absorbed Japan’s election result and new all-time highs for US stocks. The yen dropped, while a dollar index remained stable.

Japan’s futures increased by about 1%, as Prime Minister Fumio Kishida’s Liberal Democratic Party retained its outright majority, avoiding the worst-case scenario predicted by public polls. Australian shares advanced, while Hong Kong futures declined. Contracts in the United States increased following record highs for the S&P 500 and Nasdaq 100, indicating widespread optimism about corporate profits.

China’s data injected a note of caution. The purchasing managers’ indexes indicated continued economic downturn as a result of power shortages, rising commodity prices, and severe Covid regulations.

Traders are anticipating this week’s central bank meetings in the United States, the United Kingdom, and Australia. The Federal Reserve is likely to announce a reduction in its bond-buying programme. From Canada to Australia, short-term bond yields have risen on predictions that monetary authorities will eventually have to raise interest rates to rein in inflationary pressures. In Australia and New Zealand, longer-term yields decreased.

Fixed-income market volatility indicates that investors foresee a delay in the pandemic’s recovery as price pressures force central banks to reduce economic stimulus. Global equities have thus far shrugged off such dangers, remaining near all-time highs.

“Having been positive on equities, it appears appropriate to be a little more cautious this week,” Pepperstone Financial Pty’s Chris Weston wrote in a note. “However, the fact that equities have held up so well in the face of such quick interest rate re-pricing is unquestionably a plus.”

China’s property sector continues to be a source of concern. Last month, at least four developers defaulted on their obligations. China Evergrande Group dodged this danger twice by paying past-due coupons at the last minute.

Meanwhile, crude oil prices fell as pressure mounted on OPEC+ to increase output at its Thursday meeting. China released state-owned diesel and gasoline stocks to alleviate shortages.

Published by Zack Baharum

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