Markets wrap: Asian shares set to rise after US financials rebound

Asian shares were poised to climb Monday after a chaotic week for financial markets ended Friday with a rebound in US regional banks and a rally in risk assets. 

Solid jobs data has tempered fears of a US recession, improving sentiment that saw Treasuries fall and Wall Street’s favorite volatility gauge, the VIX, snap a four-day surge.

Equity futures pointed to gains of slightly less than 1% in Hong Kong and Australia. Contracts for Japan were marginally lower as traders there return from national holidays. 

The advance on Wall Street halted the S&P 500’s longest losing streak since February, with the gauge climbing 1.9%. The KBW Bank Index of financial heavyweights rebounded from its lowest since September 2020.

The Nasdaq 100 rose 2.1%, with strong earnings at Apple Inc. helping lift the megacap tech space as the world’s most-valuable company climbed almost 5%. 

Most major currencies were little changed in early trading on Monday after a gauge of dollar strength ended last week down 0.6%. The greenback advanced 0.3% versus the yen.

Bond yields rose in Australia and New Zealand following the higher Treasury yields Friday.

The US jobs data showed hiring and worker pay gains accelerated in April in signs of labor-market resilience and inflationary pressures in the face of headwinds. 

The strong figures also increase chances the Federal Reserve will hold rates higher for longer, and potentially keep the door open to an 11th straight hike in June.

Rates on swap contracts linked to Fed meetings — which on Thursday briefly priced in a cut in July — moved higher, to levels consistent with a stable policy rate until September — followed by at least two quarter-point cuts by year-end. 

Despite Friday’s stock rebound, investors still have much to worry about. The rout in US bank shares has the S&P 500 financials index on the verge of falling back below its 2007 peak. 

Meanwhile, Treasury Secretary Janet Yellen sees “simply no good options” for solving the debt limit stalemate in Washington without Congress lifting the cap. She even cautioned that resorting to the 14th Amendment would provoke a constitutional crisis.

Investors will be awaiting the release this week of the core consumer price index, which excludes food and energy and is closely watched by the Fed. It is projected to show a 5.5% increase in April from a year ago. 

In Asia, attention will swing to China’s trade figures due in the first half of the week and inflation numbers set for release on Thursday.

Elsewhere in markets, oil opened with a gain as investors assessed a complex outlook for global demand after a period of volatile trading. Gold was little changed.

Key events this week:

• US wholesale inventories, Monday
• US President Joe Biden scheduled to meet with congressional leaders on debt limit, Tuesday
• New York Fed President John Williams speaks to Economic Club of New York, Tuesday
• US CPI, Wednesday
• China PPI, CPI, Thursday
• UK BOE rate decision, industrial production, GDP, Thursday
• US PPI, initial jobless claims, Thursday
• Group of Seven finance minister and central bank governors meet in Japan, Thursday
• US University of Michigan consumer sentiment, Friday
• Fed Governor Philip Jefferson and St. Louis Fed President James Bullard participate in panel discussion on monetary policy at Stanford University, Friday.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 8:17 a.m. Tokyo time. The S&P 500 rose 1.9% Friday.
• Nasdaq 100 futures were little changed. The Nasdaq 100 rose 2.1%
• Nikkei 225 futures fell 0.2%
• Australia’s S&P/ASX 200 Index futures rose 0.9%
• Hang Seng Index futures rose 0.8%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1018
• The Japanese yen fell 0.3% to 135.19 per dollar
• The offshore yuan was little changed at 6.9195 per dollar
• The Australian dollar was little changed at $0.6753

Cryptocurrencies

• Bitcoin fell 0.5% to $28,822.18
• Ether fell 0.3% to $1,914.3

Bonds

• The yield on 10-year Treasuries advanced six basis points to 3.44%
• Australia’s 10-year yield advanced nine basis points to 3.41%

Commodities

• West Texas Intermediate crude rose 0.3% to $71.57 a barrel
• Spot gold was little changed