Asian stocks were poised to climb Monday after the S&P 500 rose to the cusp of a bull market amid strengthening bets for a Federal Reserve rate pause this month. Oil rallied on a supply cut from Saudi Arabia.
Crude jumped more 3% on the pledge to make an extra 1 million barrel-a-day reduction in July, which trims Saudi Arabia’s production to the lowest level for several years.
Equity futures for Japan, Australia and Hong Kong all rose more than 1%, suggesting early advances around the region.
Contracts for US benchmarks were little changed in Asia after further gains Friday that were fueled by big tech, options positioning and Fed bets.
A mixed jobs report shaped the wagers on a Fed pause, with signs of labor-market slackening in May despite a pickup in hiring. That bolstered the argument from Fed Chair Jerome Powell and other officials that they should take more time to assess incoming data and the evolving outlook before raising rates again.
Two-year yields, which are more sensitive to imminent central bank moves, jumped 16 basis points to 4.5% Friday. Some 25 basis points of tightening were fully priced in across the next two meetings for part of the trading session Friday, before easing back slightly. Wagers for an increase this month are a small minority.
As stocks rose Friday, Wall Street’s “fear gauge” plummeted to pre-pandemic levels. The Cboe Volatility Index, or VIX, dropped below 15 from an average of 23 in the past year.
Broadcom Inc. climbed after predicting that sales tied to artificial intelligence will double this year.
“The impressive run for equities continues to drive retail investors into the market,” said Mark Hackett, chief of investment research at Nationwide. “Investors have spent much of the past three years obsessed by the Fed, inflation, and payrolls, though volatility around those reports has settled, reflecting a less emotional market. This is bullish, as less reactivity is a sign of a healthy market.”
The stock advance 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 Treasury notes — approximately $1 trillion — to be auctioned as the US department replenishes its general account following a debt-limit deal. that could ignite a significant sapping of liquidity from financial markets, 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 appears in European Parliament, Monday
- Rate decisions in Australia, Poland, Tuesday
- China forex reserves, trade, Wednesday
- US trade, consumer credit, Wednesday
- Canada rate decision, Wednesday
- EIA crude oil inventory data, Wednesday
- Eurozone GDP, Thursday
- Rate decisions in India, Peru, Thursday
- Japan GDP, Thursday
- US wholesale inventories, initial jobless claims, Thursday
- China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 7:26 a.m. Tokyo time. The S&P 500 rose 1.4% Friday
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.7%
- Nikkei 225 futures rose 1.3%
- Australia’s S&P/ASX 200 Index futures rose 1.1%
- Hang Seng Index futures rose 1.1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0706
- The Japanese yen fell 0.1% to 140.07 per dollar
- The offshore yuan was little changed at 7.1067 per dollar
- The Australian dollar was little changed at $0.6605
Cryptocurrencies
- Bitcoin was little changed at $27,249
- Ether was little changed at $1,902.71
Bonds
- The yield on 10-year Treasuries advanced 10 basis points to 3.69% Friday
Commodities
- West Texas Intermediate crude rose 3.1% to $73.99 a barrel
- Spot gold fell 1.5% to $1,947.97 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.
