Asian stocks rose on Friday as Singapore became the latest nation to suspend policy tightening, and investors felt more optimistic that the next rate rise in the United States will be the last of the cycle.
The dovish signals kept non-yielding gold at one-year highs, while the euro led the currency pack as the European Central Bank remained steadfastly bullish.
The Monetary Authority of Singapore (MAS) startled many by maintaining policy as is, claiming that the tightening currently in place will guarantee inflation declines considerably later this year.
The MAS followed central banks in Canada and Australia in delaying rises, while the US Federal Reserve seemed to be on the verge of doing the same after weak producer pricing data.
Futures indicate a 67% possibility that the Fed will raise rates in May, but then essentially no chance of another hike and maybe 50 basis points of reduction by the end of the year.
Retail sales figures for the United States are coming later in the afternoon, and some experts are predicting a negative surprise, which would reinforce the dovish tilt.
The potential of a rate peak helped to outweigh concerns about a recession, as MSCI’s broadest index of Asia-Pacific equities outside Japan rose 0.4%.
Japan’s Nikkei gained 1.1%, while Singapore’s stocks gained 0.5%.
Chinese blue chips rose 0.2%, with an unexpectedly positive trade result brightening the economic outlook.
“The stronger-than-expected March China export gain suggests that the economic recovery is more broadly-based than our expectations, and we have revised up our 1Q GDP forecast,” wrote analysts at JPMorgan in a note, forecasitng a seasonally adjusted annual rate of 10.2% quarter-on-quarter from 9.0% previously.
The EUROSTOXX 50 futures rose 0.3%, while the FTSE futures rose 0.2%. After significant advances overnight, the S&P 500 and Nasdaq futures remained stable. [.N]
Investors are now preparing for results from Citigroup Inc., Wells Fargo, and JPMorgan Chase & Co., which might put the optimistic attitude to the test given the sector’s recent stress.
“We will be looking at bank earnings calls to follow discussions around deposits, lending standards, and any adjustments to bank funding that might be planned, including more debt sales,” said analysts at NatWest Markets.
EURO IS ON ROLL
With EU industrial production exceeding estimates and inflation remaining stubborn, markets continue to price in at least 50 basis points of tightening and no cuts this year.
The margin between US 10-year rates and German bunds shrank to roughly 100 basis points, the narrowest in two years.
If the spread falls below 100 basis points, it will be the tightest since early 2014, when the euro was trading at $1.3600. The euro remained steady at $1.1059 on Friday after hitting a one-year high of $1.1068 overnight.
The euro was also nearing November highs over 146.00 yen and soared to a 10-month high against the Singapore dollar on the MAS announcement.
The dollar remained reasonably stable against the yen, trading at 132.57 yen, underpinned by the Bank of Japan’s continued ultra-easy monetary stance.
All the speculation of further rate cuts in the United States has boosted non-yielding gold, which is now trading at $2,044 per ounce after reaching a one-year high of $2,048.71 overnight, not far from its all-time high of $2,069.89. [GOL/]
Oil prices have stabilised after falling overnight as OPEC warned of potential risks to summer oil demand in a monthly report, citing growing stocks and global economic problems. [O/R]
Brent oil gained 27 cents to $86.36 a barrel, while US crude gained 26 cents to $82.42 a barrel.