SINGAPORE: Global stocks began the week on firmer footing ahead of a highly anticipated earnings release from Nvidia, while in Japan, a speech from its central bank’s head left markets none the wiser on the country’s rate outlook.
Bank of Japan Governor Kazuo Ueda reiterated on Monday the central bank will keep raising interest rates if economic and price developments move in line with its forecasts, but made no mention of whether a hike could come in December.
His speech had been closely watched by investors for clues on the BOJ’s next rate hike, which could have been seen as a way to push back against the yen’s weakness.
The Japanese currency has fallen some 7% since October against a resurgent dollar and last week weakened past the 156 per dollar level for the first time since July, keeping traders on alert for any intervention from Japanese authorities.
It was last 0.3% lower at 154.72 per dollar, paring some of the losses it made as Ueda spoke.
On the chance of a BOJ hike next month, IG market analyst Tony Sycamore said it would “depend on where dollar/yen is to a degree”. “If dollar/yen’s up at around 160, I think that would increase the (chances) of a rate hike.
But I think he’s probably not unhappy with dollar/yen sitting around 150, 152. I think that probably keeps him on the sidelines until next year.
“It’s coming, it’s just a matter of when the Japanese economy is doing ok.” Despite a weaker yen, Japan’s Nikkei fell 0.76%, dragged by a decline in shares of healthcare companies.
MSCI’s broadest index of Asia-Pacific shares outside Japan, meanwhile, advanced 0.7%. Similarly, Nasdaq futures gained 0.6%, while S&P 500 futures edged up 0.25%.
The highlight for investors this week will be Nvidia’s third-quarter results on Wednesday, where analysts expect the artificial intelligence chip leader to record a jump in revenue.
Asian markets fluctuate at end of tough week
Shares of Nvidia are up nearly 200% this year, with its hefty weighting in the S&P 500 partially responsible for the index’s charge to record highs this year.
But its blistering multi-year run has also raised the bar for earnings outperformance and a slip-up could fuel worries that the market’s AI hopes have outstripped reality.
Elsewhere, Chinese stocks opened higher on Monday.
The CSI300 blue-chip index last gained 1.22%, while the Shanghai Composite Index jumped 1.34%. Hong Kong’s Hang Seng Index rose 1.5%.
Trump and rates
US Treasury yields held near multi-month highs on Monday, bolstered by bets of less aggressive Federal Reserve rate cuts down the line.
The benchmark 10-year yield steadied at 4.4315%, while the two-year yield last stood at 4.2990%.
Futures imply a 60% chance of the Fed easing by a quarter-point in December and have only 77 basis points of cuts priced in by late 2025, compared with more than 100 a few weeks ago.
That has come on the back of Chair Jerome Powell’s comments last week signalling that borrowing costs could remain higher for longer, and on the view that US President-elect Donald Trump’s touted policies of tariffs, reduced immigration and debt-funded tax cuts will stoke inflation, limiting the scope for further policy easing.
“With changes afoot in immigration policy, tariff policy, and fiscal policy, Fed officials would tread more lightly anyway in view of the inflationary impact that these policies pose, and the need to keep real policy interest rates higher than otherwise, as a result,” said Thierry Wizman, global FX and rates strategist at Macquarie.
At least seven Fed officials are due to speak this week and traders assume they will sound cautious about aggressive cuts.
The shift in outlook for US rates and inflation has in turn lifted the dollar, which has scaled fresh peaks alongside US Treasury yields.
Against a basket of currencies, the greenback hovered near a one-year high at 106.66. Sterling last bought $1.2640, languishing near last week’s six-month low, while the euro ticked up 0.03% to $1.0543.
A horde of European Central Bankers are also speaking this week and could sound more dovish given recent soft economic data and the risk of Trump’s proposed tariffs hitting EU trade.
In commodities, oil prices firmed on Monday. Brent crude futures rose 0.18% to $71.17 a barrel, while US crude futures were little changed at $67.05 per barrel.
Spot gold jumped 1.24% to $2,593.02 an ounce, recovering from its sharp fall last week.
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