Asian stocks are anticipated to open higher on Monday, with equity-index futures for Japan and South Korea pointing to gains, while those for Australia are stable. This upward movement comes as oil prices edged higher, driven by renewed concerns over potential disruptions to crude supplies and increased inflation following recent US-Iran attacks. The robust US jobs report is also seen as a positive for global growth, despite increasing the likelihood of interest rate hikes.
The Japanese yen continues to be a central point of market attention, fluctuating around 156 per dollar. This follows a more than 2% gain last week, spurred by an unwinding of carry trades and growing expectations for successive rate hikes from the Bank of Japan (BOJ). Additionally, there is speculation that Japan's Government Pension Investment Fund (GPIF) might increase its target allocation to domestic bonds. Strategists at Barclays Securities, including Shinichiro Kadota, suggest that a combination of GPIF reallocation and aggressive BOJ tightening could push the dollar-yen pair towards 150 and potentially beyond, though further yen strengthening depends heavily on the BOJ's actions.
In other significant developments, China's Ministry of Finance plans to inject 300 billion yuan (approximately $44.7 billion to $45 billion) in special bonds into its largest banks and insurers. This initiative aims to alleviate margin pressure, expand lending capacity, and bolster provisions against potential bad loans. Meanwhile, Hon Hai Precision Industry Co., a key server assembly partner for Nvidia Corp., reported a substantial 52% rise in monthly sales, propelled by strong demand for servers as companies accelerate their efforts to build data centers and AI capabilities. This surge in Hon Hai's sales is closely monitored as an indicator of AI spending.
Oil prices have seen an uptick, with Brent crude climbing 0.2% to $96.45 a barrel and US crude rising 0.4% to $91.85 a barrel. These price increases, alongside stronger-than-expected US payroll data, heighten the focus on the upcoming US consumer price index (CPI) report, due this Friday. Market forecasts anticipate a 0.2% rise in core CPI, with a potential risk of 0.3%. This inflation data will be crucial in influencing the Federal Reserve's decision on interest rates, with a strong CPI likely solidifying expectations for a September rate hike. The European Central Bank is also expected to raise rates to 2.5% on Thursday, with futures implying a 75% chance of another hike to 3.0% by December.
Technology shares are leading gains in Asian equities, mirroring a rally in US info-tech peers. The MSCI Asia Pacific Index rose 1.4%, with South Korean chipmakers SK Hynix Inc. and Samsung Electronics Co. being major contributors. This uplift is partly attributed to optimism surrounding OpenAI's announcement of a new generation of its technology, GPT-6, which is expected to boost demand for AI computing power. Despite robust US payroll data that strengthened the case for a Fed rate hike, the resilience in tech stocks indicates continued investor confidence in the AI sector.
