Asian share markets demonstrated resilience on Monday, with the Nikkei reaching yet another milestone high, while investors geared up for a week packed with central bank meetings and crucial economic data that could shape future interest rate decisions.
All eyes will be on Federal Reserve Chair Jerome Powell’s testimony before lawmakers on Wednesday and Thursday, with market analysts anticipating a cautious stance on policy amid recent inflationary surprises.
The February payrolls report on Friday holds potential to sway market sentiments, with forecasts predicting a robust increase of 200,000 jobs following January’s impressive surge of 353,000.
In Europe, the European Central Bank is expected to maintain rates at 4.0%, while possibly revising down its inflation outlook, setting the stage for potential rate cuts in the future.
Market analysts at NatWest Markets suggest a dovish but cautious tone from the ECB, hinting at a possible rate cut in June. They project a total of 100 basis points in cuts for the year, with a potential initial 25 basis point decrease.
The Bank of Canada is also anticipated to hold steady this week, with the possibility of a rate cut later in the year.
Other significant events include President Joe Biden’s State of the Union address, Super Tuesday U.S. primaries, and China’s National People’s Congress meeting, where new stimulus measures might be discussed.
In Asian markets, Chinese blue chips were slightly down as investors awaited concrete news on potential stimulus measures. However, MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.4%, rebounding after a slight dip last week.
Japan’s Nikkei surged by 0.8%, breaching the 40,000 mark for the first time, supported by Tokyo Electron’s remarkable 55% gain since the year began. A positive report on fourth-quarter capital expenditure hinted at a possible revision of GDP figures, potentially averting a recession.
Speculation mounts that Japan may end its deflationary period, signaling a shift in policy direction. EuroSTOXX 50 futures advanced by 0.2%, while S&P 500 and Nasdaq futures remained near flat, following record highs fueled by positive earnings and enthusiasm for AI-related ventures.
In currency markets, the dollar weakened slightly due to soft U.S. economic data, while the Japanese yen strengthened ahead of Tokyo’s consumer price data release, expected to show an uptick in inflation for February.
Gold maintained its two-month high, while oil prices edged up after OPEC+ members, led by Saudi Arabia and Russia, agreed to extend voluntary production cuts into the second quarter. Brent crude rose to $83.68 a barrel, while U.S. crude reached $79.99 per barrel.