Investor Bets on Central Bank Rate Cuts
US economic indicators from Friday (May 31) influenced market risk sentiment early in the Monday (June 3) Asian session.
The US Core PCE Price Index increased 2.8% year-on-year in April after advancing 2.8% in March. Moreover, personal income increased by 0.3% while personal spending rose by 0.2%. Personal income and spending increased by 0.5% and 0.7% in March. The softer numbers signaled a possible dampening in demand-driven inflation.
On Friday, US 10-year Treasury yields fell by 1.43%, and this downward trend continued into Monday, with an additional decline of 0.20% during the early Asian session.
On Monday, the US futures were in positive territory, with Dow mini and Nasdaq mini gaining 77 and 36 points, respectively. The S&P 500 min was up 9 points. On Friday, the Nasdaq Composite Index slipped by 0.01%. The Dow and the S&P 500 advanced by 1.51% and 0.80%, respectively.
Furthermore, investor expectations of an ECB rate cut on Thursday (June 6) drove buyer demand for riskier assets. An ECB rate cut would signal the beginning of a cycle of monetary policy easing.
China Caixin Manufacturing PMI Beats Forecasts
Economic data from China eased immediate fears of a slowdown in the demand environment. The Caixin Manufacturing PMI increased from 51.4 to 51.7 in May. Economists forecast a PMI of 51.5. According to the May survey,
- Production rose at the most marked pace since June 2022.
- New domestic and overseas orders increased, though slower than in April 2024.
- The upward trend in new orders drove backlogs higher, though firms remained cautious about increasing headcounts.
- Input price inflation was the highest since October 2022, with some firms passing costs onto their clients.
- Optimism across the manufacturing sector improved in May 2024.
Hang Seng Index Leads the China Equity Markets Higher
On Monday (June 3), the CSI 300 and the Shenzhen Composite Index advanced by 0.23% and 0.34%, respectively. The better-than-expected manufacturing PMI numbers from China contributed to the gains. The Hang Seng Index rallied 2.36% through the morning Asian session.
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See all Nikkei forecastsThe tech and real estate sectors supported the early gains. The Hang Seng Mainland Properties Index (HSMPI) and Hang Seng Tech Index (HSTECH) gained 2.94% and 2.86% in the morning session.
Alibaba (9988) and Tencent Holdings (0700) were up 2.60% and 3.74%, respectively, with Baidu (9888) gaining 1.66%.
Nikkei Index Sees Positive Territory on BoJ Sentiment
The Nikkei Index was up 1.11% in the morning session. USD/JPY gains from Friday drove buyer demand for Nikkei-listed export stocks, with tech stocks advancing on interest rate cut bets.
Manufacturing PMI numbers from Japan had a limited impact on the Nikkei Index. In May, the Jibun Bank Manufacturing PMI increased from 49.6 to 50.4, down from a preliminary 50.5.
Fast Retailing Co. Ltd. (9983) and Sony Group Corporation (6758) rose by 1.84% and 1.86%, respectively. Tokyo Electron Ltd. (8035) gained 1.43%, with KDDI Corp. (9433) advancing by 0.21%. Softbank Group Corp (9984) trailed the broader market, rising by 0.03%.
Bank, Mining, and Oil Stocks Contribute to ASX 200 Gains
The ASX 200 was up 0.81% on Monday through the Asian morning session. Bank, mining, and oil stocks delivered the early upswing.
BHP Group Ltd (BHP) rallied 1.26%, with Fortescue Metals Group Ltd. (FMG) advancing by 0.81%. Rio Tinto Group Ltd. (RIO) increased by 0.56%. Iron ore prices were higher on Monday, with iron ore spot prices up 0.51%.
Oil prices were also higher, with WTI crude oil up 0.41% to $77.40. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) saw gains of 1.44% and 1.38%, respectively.
ANZ Group Holdings Ltd. (ANZ) and Westpac Banking Corp. (WBC) were up 1.20% and 1.62%, respectively. National Australia Bank Ltd. (NAB) rose by 1.09%, with Commonwealth Bank of Australia (CBA) gaining 0.82%.
However, gold spot (XAU/USD) declined on Friday, impacting gold-related stocks. Gold spot fell by 0.68% on Friday, ending the session at $2,327. Northern Star Resources Ltd. (NST) and Evolution Mining Ltd (EVN) were down 0.28% and 0.64%, respectively.
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