LDN - Business

World shares climb on Fed cut bets, China gains; yen weakens

[May 06, 2024] By Nell Mackenzie and Rae Wee

LONDON/SINGAPORE (Reuters) -Global stocks ticked higher on renewed bets that the Federal Reserve would likely ease interest rates this year, while the yen weakened after a strong surge last week from Tokyo's suspected currency intervention.

With the UK and Japan on public holidays, markets in mainland China and Europe got off to an upbeat start, with Friday's softer-than-anticipated U.S. jobs report underpinning sentiment by renewing market rate-cut bets.

Europe's broadest stock index rose 0.4% while S&P 500 and Nasdaq futures added 0.2% each in a positive sign for the Wall Street open later on.

Oil prices were also in focus on the prospects of Saudi Arabian price hikes and rising tensions in the Middle East, with Brent futures up 80 cents to $83.76 a barrel and U.S. crude futures 91 cents higher to $79.02 per barrel.[O/R]

On Monday, Israel's military called on Palestinian civilians to evacuate Rafah as part of a "limited scope" operation, but did not immediately confirm media reports this was part of preparation for a ground assault.

MSCI's broadest index of Asia-Pacific shares outside Japan peaked at its highest level since February 2023 and last gained 0.57%, while China's blue-chip index closed 1.5% higher.

Hong Kong's Hang Seng Index rose 4.7% last week and on Friday clocked its longest daily winning streak since 2018, closing on Monday 0.55% higher.

The rebound in Chinese markets followed the country's Politburo meeting, where policymakers said they will step up support for the economy with prudent monetary and proactive fiscal policies.

A long-awaited recovery in the Chinese economy is also gaining momentum. Data on Monday showed the country's services activity expansion slowed a touch amid rising costs, but growth in new orders accelerated and business sentiment rose.

Markets globally have also enjoyed a boost from Friday's U.S. nonfarm payrolls report.

That reinforced bets Fed rate cuts would most likely come this year, after Chair Jerome Powell also maintained the central bank's easing bias last week.

"(The) data point to a jobs market that is still tight, but not nearly as hot as it was a year or two ago," said economists at Wells Fargo. "This should support a further slowdown in inflation as the year progresses, even if improvement proceeds only gradually."

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Pedestrians wait to cross a road at a junction near a giant display of stock indexes in Shanghai, China August 3, 2022. REUTERS/Aly Song/File Photo

Traders would be closely watching whether the S&P rises beyond the 50 day moving average of 5130 on Monday, an important price point in the S&P, said Florian Ielpo, head of macro at Lombard Odier Investment Managers.

"If we breach this level we'll continue to see an uptrend of new highs but if it is missed, it could take a couple of days or even weeks to return to these levels," said Ielpo.

In Europe, Goldman Sachs raised its 2024 EPS growth forecast for STOXX 600 <.STOXX> companies to 6% from 3% earlier, the bank said in a note on Friday.

According to Goldman, a 10% annual rise in Brent prices adds about 2.5 pp (percentage points) to annual EPS growth, and a 10% weaker euro/dollar exchange rate adds about the same.

The dollar held broadly steady on Monday, leaving the euro away from a one-month high to last trade at $1.0769, while sterling similarly edged lower and last bought $1.2545. [FRX/]

INTERVENTION WATCH

Elsewhere, traders remained on alert for further volatility in the yen, after last week's bouts of suspected intervention from Japanese authorities to stop a sharp slide in the currency.

Tokyo is suspected of having spent more than 9 trillion yen($59 billion) to support its currency last week, as suggested by data from Bank of Japan, taking the yen from a 34-year low of 160.245 per dollar to a roughly one-month high of 151.86 over the span of a week.

The yen gave back some of those gains on Monday and was last 0.5% lower at 153.750 per dollar, after briefly weakening past the 154 level earlier in the session.

Gold tacked on 0.7% to $2,317 an ounce. [GOL/]

($1 = 153.5700 yen)

(Reporting by Nell Mackenzie and Rae Wee; Additional reporting by Roshan Abraham; Editing by Dhara Ranasinghe, Lincoln Feast, Gerry Doyle and Ed Osmond)

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