Monday saw Asian stocks follow Tokyo higher as the tech sector benefited from AI hype ahead of a busy week filled with central bank meetings, important economic data, and corporate results.
As a result of the increasing demand for high-end chips used in artificial intelligence (AI) applications, Taiwan Semiconductor Manufacturing (TSMC) increased its profit projection last week, sending chip stocks surging.
As a result, the Nikkei (.N225) opened higher by 1.2%, reaching a new 34-year high, and saw gains for January reach 8.7%.
Chipmakers that benefited from the AI-driven surge included Advanced Micro Devices (AMD.O) and Nvidia (NVDA.O), opening a new tab. It is anticipated that this will increase focus on the results of Intel (INTC.O), IBM (IBM.N), Tesla (TSLA.O), Netflix (NFLX.O), Lockheed Martin (LMT.N), and several other companies this week.
S&P 500 futures firmed 0.3%, while Nasdaq futures continued their climb with gains of 0.7%. FTSE futures increased by 0.5% and EURO STOXX 50 futures by 1.0%. After suffering a setback the previous week, MSCI’s broadest index of Asia-Pacific equities outside of Japan (.MIAPJ0000PUS) opened a new tab and increased 0.5%.
Weakness in China’s markets (.CSI300), opens a new tab, which fell to five-year lows last week and raised concerns that state funds could have to back equities, which has put pressure on the index.
Despite the central bank once again forgoing a rate decrease in its market operations on Monday, Beijing continues to appear hesitant to provide strong support. Owing in part to a second month of lower consumer prices, the Bank of Japan is anticipated to maintain its ultra-loose policy at its meeting on Tuesday.
Analysts generally assume that before determining whether to push toward tightening, the central bank will wait to see if the spring wage increases provide robust growth.
“Drawing on the first ‘shunto’ results released mid-March and the April branch managers’ meeting, the BoJ will be able to confirm the sustainability of wages and exit negative interest rate policy in April,” a report from Barclays analysts stated. “Thereafter, we expect gradual rate hikes from H2 24, but policy rates should remain well below neutral.”
Thursday’s meeting of the European Central Bank (ECB) is expected to be uneventful due to recent hawkish remarks made by senior members.
“A March cut still makes sense, but the pushback from ECB officials has been potent in recent days, making a June cut more likely,” NatWest Markets analyst Giovanni Zanni stated. “Data have continued to support our long-held view that the ECB probably went too far in its rate-rising cycle,” he stated. “We believe that a delay will likely imply the need for a bolder first move, with a 50bp cut more likely than a 25bp one.”
By June, 40 basis points of easing have been priced in by futures, with a 76% possibility of a first decrease in May.
No change in interest rates is anticipated for this week’s meetings of the central banks in Canada and Norway.
Markets have also reduced the likelihood of a March rate drop by the Federal Reserve to 49% from over 75% a few weeks ago due to hawkish comments. However, a 25 basis point first easing in May is more than factored in.
In advance of the next meeting on January 30-31, Fed officials are not available this week. Later this week’s news on core inflation and U.S. economic growth may have an impact on the outlook for an early relaxation.
The core PPI is predicted to decline to 3.0% annually in December from 3.2% the previous month, the lowest level since early 2021, while the GDP is projected to grow at an annualized 2% rate in the fourth quarter.
The tendency of recent data to surprise on the high side is one reason why 10-year Treasury rates increased by over 20 basis points last week, closing at 4.12%.
The dollar saw a five-week high relative to a basket of currencies, which was supported by this change. The euro remained stuck at $1.0900 after falling 0.5% for the week, while the yen was slightly down at 147.88 on Monday after surging 2.2% the previous week.
Due to all of this, non-yielding gold becomes unappealing at $2,029 per ounce.
Concerns about demand throughout the world have so far outweighed the risk to supply posed by Middle East conflicts in the oil market.
While U.S. crude for February decreased 2 cents to $73.39 per barrel, Brent was down 32 cents at $78.24 per barrel.
- Published By Team Genuine Reporter