By Wayne Cole
SYDNEY, Jan 22 (Reuters) – Japanese shares led U.S. and European futures higher on Monday as AI hype juiced up 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.
That helped send the Nikkei .N225 up more than 1.5% to a fresh 34-year peak and brought gains for January to almost 9%.
Chipmakers, including Nvidia NVDA.O and Advanced Micro Devices AMD.O, were among the beneficiaries of the AI-driven rally.
That should sharpen attention on results from Intel INTC.O and IBM IBM.N this week, along with Tesla TSLA.O, Netflix NFLX.O, Lockheed Martin LMT.N and a host of others. RESF/US
Nasdaq futures NQc1 extended their rally with gains of 0.6%, while S&P 500 futures ESc1 firmed 0.2%. EUROSTOXX 50 futures STXEc1 jumped 0.8% and FTSE futures FFIc1 0.3%.
Yet MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS still eased 0.45%, having already taken a drubbing last week.
The index has been pressured by weakness in China’s markets .CSI300, 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 with the central bank again skipping 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.0#BOJWATCH
“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. 0#ECBWATCH
Central banks in Canada and Norway also meet this week and no change to rates is expected, though Turkey is thought likely to hike again.
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. FEDWATCH
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 US10YT=RR climbed almost 20 basis points last week to last stand at 4.12%.
That shift underpinned the dollar, which hit a five-week high on a basket of currencies =USD. It was a shade lower at 148.07 yen JPY=EBS on Monday, having jumped 2.2% last week, while the euro was idling at $1.0900 EUR=EBS after easing 0.5% for the week. FRX/
All of this left non-yielding gold looking unattractive at $2,023 an ounce XAU=. GOL/
In the oil market, worries about global demand has so far offset the threat to supply from tensions in the Middle East.
Brent LCOc1 was off 23 cents at $78.33 a barrel, while U.S. crude CLc1 for January eased 25 cents to $73.16 per barrel. O/R
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
(Reporting by Wayne Cole; Editing by Shri Navaratnam)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.