SYDNEY (Reuters) – Asian stocks rose on Monday after recent peaks as Chinese markets swung higher, while investors waited to see if recent sales in longer-dated U.S. treasuries would expand and perhaps take some pressure off the beleagured dollar.
A man with a protective face mask, following the outbreak of coronavirus (COVID-19), runs for a share ticket outside a broker in Tokyo, Japan, May 18, 2020. REUTERS / Kim Kyung-Hoon
MSCI’s widest index of shares in Asia-Pacific outside Japan .MIAPJ0000PUS gained 0.5% to 565.74, and came closer to the January top of 574.52.
Chinese blue chips .CSI300 led the way with gains of 2.0%, with the country’s central bank providing more medium-term loans to the financial system.
Japan’s Nikkei .N225 plunged 0.6% after hitting a six-month high on Friday as the country suffered its largest economic contract on record in the second quarter.
E-Mini futures for the S&P 500 ESc1 strengthened 0.39% to be just below the record high of 3,386.15. [.N]
The U.S. second-quarter profit season wraps up with the major retailers reporting this week, including Walmart Inc (WMT.N), Home Depot Inc (HD.N) and Kohls Corp (KSS.N).
Politics will be a function when the Democratic National Convention begins the 2020 presidential election season.
Sino-US relations remain a sticking point with US President Donald Trump on Saturday, saying he could put pressure on more Chinese companies such as technology giant Alibaba (BABA.N) after he moved to ban TikTok.
US oil transfers to China will rise sharply in the coming weeks as the two top economies of the world come together to halt their January deal after a lengthy trade war.
News that the planned review of the US-China Phase-One Trade Agreement was postponed indefinitely over the weekend did not elicit much of a reaction.
The highlight of the economic calendar will be the release of the minutes of the last Federal Reserve policy meeting.
“Market participants will seek insight into the details and exact timing of when the Fed’s monetary policy review will be completed, as well as more clarity regarding the potential timing and structure of any changes to forwarding,” analysts noted at NatWest Markets.
Speculation is widespread the Fed will adjust an average inflation target, which sought to push inflation above 2% for a while to compensate for the years it has been running below.
That combined with massive new debt bans caused a sharp increase in yields on long-term bonds last week with yields of 30 years US30YT = RR with 21 basis points increasing as the curve steepened.
The rise in yields gave the dollar some rest after weeks of loss. Against a currency exchange rate, the dollar was a fraction lower at 93,035 = USD, still uncomfortably close to the recent trough of 92,521.
The euro EUR = flattened out a bit last week when it met resistance around the two-year high of $ 1.1915. However, it still ended the week with a profit of 0.5% and was last held at $ 1,1856.
“Investors should stay strategically long EUR / USD,” said CBA forex analyst Elias Haddad. “Greater fiscal solidarity of the Eurozone, true differences in two-year exchange rates and relative trends of the central bank balance between the Eurozone and the US suggest that the fundamental rise in EUR / USD is intact.”
“EUR / USD is still undervalued relative to value implied by differences in price deflator which picks ‘real value’ at around $ 1.2300.”
The single currency also made a notable break higher on the yen EURJPY = to reach ground, unbelievable since April 2019. Indeed, the yen fell last week against most of its peers, with the dollar falling to 106 on Monday , 59 yen JPY = hold.
In commodity markets, gold rose 0.4% to $ 1,935 a year XAU =, after the jump in bond yields saw it lose 4.5% last week in its worst performance since March. [GOL/]
Oil prices rose ahead of hopes on Chinese demand and data showed crude oil, gasoline, and distillate inventories all declined over the weekend of August 7th.[O/R]
Brent crude LCOc1 futures rose 33 cents to $ 45.13 per barrel, while US crude CLc1 rose 39 cents to $ 42.40.
Edited by Lincoln Feast and Sam Holmes
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