Asian Currency

Japan leads Asia stocks higher, central banks loom -January 21, 2024 at 07:36 pm EST


* Asian stock markets : https://tmsnrt.rs/2zpUAr4

* BOJ, ECB, PBOC, BOC seen staying steady this week

* Intel, Tesla, Netflix among earnings rush

* US GDP, core PCE inflation could impact Fed outlook

SYDNEY, Jan 22 (Reuters) – Asian shares followed Tokyo
higher on Monday as AI hype helped the tech sector ahead of a
week brimming with central bank meetings, major economic data
and corporate earnings.

Chip stocks have been on a roll since Taiwan Semiconductor
Manufacturing (TSMC) upgraded its profit outlook last week on
booming demand for high-end chips used in AI applications,
sending the Nikkei to a fresh 34-year peak. The index
climbed another 0.8% early on Monday, to be up 8.3% so far in
January.

Chipmakers, including Nvidia and Advanced Micro
Devices, were among the beneficiaries of the AI-driven
rally.

That should sharpen attention on results from Intel
and IBM this week, along with Tesla, Netflix
, Lockheed Martin and a host of others.

S&P 500 futures edged up 0.1%, after notching a
record close on Friday, while Nasdaq futures added 0.3%.

MSCI’s broadest index of Asia-Pacific shares outside Japan
advanced 0.3%, after taking a drubbing last
week.

The index has been pressured by weakness in China’s markets
, which hit five-year lows last week and sparked
speculation state funds were having to support stocks.

Beijing still seems reluctant to deliver aggressive stimulus
and the central bank is expected to again skip on a rate cut in
its market operations on Monday.

The Bank of Japan is also expected to keep policy super-easy
at a meeting on Tuesday, helped by a second month of slowdown
in consumer prices.

The general assumption among analysts is the central bank
will want to see if the spring wage rounds deliver strong growth
before deciding whether to nudge toward tightening.

“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,” wrote analysts at Barclays in a note.

“Thereafter, we expect gradual rate hikes from H2 24, but
policy rates should remain well below neutral.”

ECB IN NO RUSH

The European Central Bank (ECB) meets on Thursday and is
considered certain to hold steady, given recent hawkish
commentary from top officials.

“A March cut still makes sense, but the push back from ECB
officials has been potent in recent days, making a June cut more
likely,” said Giovanni Zanni, an economist at NatWest Markets.

“Data have continued to support our long-held view that the
ECB probably went too far in its rate rising cycle,” he added.
“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.”

Futures have priced in 40 basis points of easing by June,
with a first cut in May implied at a 76% chance.

Central banks in Canada and Norway also meet this week and
no change to rates is expected.

Hawkish talk has also seen markets scale back the
probability of a March cut from the Federal Reserve to 49%, from
around 75% a couple of weeks ago. Yet, a first easing of 25
basis points in May is more than fully priced.

Fed officials are in blackout this week ahead of the next
meeting on Jan. 30-31.

Prospects for an early easing could be affected by data on
U.S. economic growth and core inflation due later this week.

Gross domestic product is seen running at an annualised 2%
pace in the fourth quarter, while the core personal consumption
price index is seen slowing to an annual 3.0% in December, down
from 3.2% the previous month and the lowest since early 2021.

Recent data has tended to surprise on the high side, one
reason yields on 10-year Treasuries climbed almost
20 basis points last week to last stand at 4.13%.

That shift underpinned the dollar, which hit a five-week
high on a basket of currencies. It was up at 148.13 yen
, having jumped 2.2% last week, while the euro was
idling at $1.0893 after easing 0.5% for the week.

All of this left non-yielding gold looking unattractive at
$2,028 an ounce.

In the oil market, worries about global demand has so far
offset the threat to supply from tensions in the Middle East.

Brent was off 23 cents at $78.33 a barrel, while
U.S. crude for January eased 9 cents to $73.16 per
barrel.

(Reporting by Wayne Cole;
Editing by Shri Navaratnam)



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