Asian Stocks Eye Early Gains as Rate Cut Bets Firm: Markets Wrap

(Bloomberg) — Stocks gained on signs Asia’s manufacturing sector is improving and renewed hopes for a shift to interest-rate cuts by the Federal Reserve. Oil fluctuated after OPEC+ set out a plan to restore some production.

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Europe’s Stoxx 600 index climbed 0.5% while US futures ticked higher. GameStop Corp. soared after the Reddit account that drove the meme-stock mania of 2021 posted what appeared to be a $116 million position in the shares. India’s stocks rose to a record as exit polls indicated a resounding victory for Prime Minister Narendra Modi’s party. Yields on 10-year Treasuries edged lower.

Friday’s reading of core personal consumption expenditures — the Fed’s preferred measure for inflation — showed the smallest increase this year, boosting hopes policy makers will finally begin to ease policy. Markets are also being buoyed by strong data from Asia, with China’s manufacturing activity expanding at the fastest pace in almost two years in May.

“The combination of Friday’s soft US inflation data, OPEC’s hint on softer supply policy, the Chinese PMI figure and the reaction to the Indian election results paint the market in green,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

While euro area manufacturing statistics are due later Monday, the main event comes on Thursday, when the European Central Bank may deliver its first interest-rate cut of the cycle, possibly opening the door to a weaker euro.

Investors are watching the outcomes of a trio of elections in emerging markets.

India’s rupee and sovereign bonds rose on bets that Modi’s party will be in a position to push through policy measures that are considered key for economic growth. The rupee was among Asia’s top performers, climbing 0.5%.

“India is well positioned to scale manufacturing in select sectors like electronics, auto, pharma and textiles in the next decade,” Bank of America Corp. analysts including Amish Shah wrote. The government support “would make India an ideal and reliable partner for companies who are looking to shift manufacturing away from China.”

In Mexico, Claudia Sheinbaum is set to become the country’s first female leader in a landslide victory, capitalizing on outgoing President Andres Manuel Lopez Obrador’s popularity while also inheriting rampant criminal violence and a large fiscal deficit left by his government.

Follow Bloomberg’s Mexico election live blog here for the latest results

Meanwhile, investors were bracing for further upheaval in South Africa’s financial markets. Last week’s elections produced no outright winner and the outcome of ongoing coalition talks remains uncertain.

GameStop shares rose to $37.90 on Germany’s Tradegate, 64% above Friday’s close.

A June 2 screenshot by Keith Gill, who goes by DeepF— Value on Reddit, shows five million shares bought at $21.27 per share. It was the account’s first post in three years. The screenshot, which also included 120,000 call options worth $65.7 million due to expire on June 21, couldn’t be verified.

Some key events this week:

• Eurozone S&P Global Manufacturing PMI, Monday

• UK S&P Global / CIPS Manufacturing PMI, Monday

• US construction spending, ISM Manufacturing, Monday

• International Atomic Energy Agency board meets in Vienna, Monday

• South Korea CPI, Tuesday

• Germany unemployment, Tuesday

• South Africa GDP, Tuesday

• Brazil GDP, Tuesday

• US factory orders, JOLTS, Tuesday

• Australia GDP, Wednesday

• South Korea GDP, Wednesday

• China Caixin services PMI, Wednesday

• Eurozone S&P Global Services PMI, PPI, Wednesday

• Canada rate decision, Wednesday

• Eurozone retail sales, ECB rate decision, Thursday

• China trade, forex reserves, Friday

• Eurozone GDP, Friday

• Mexico CPI, Friday

• Chile copper exports, trade, CPI, Friday

• US unemployment rate, nonfarm payrolls, wholesale inventories, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.5% as of 8:28 a.m. London time

• S&P 500 futures rose 0.1%

• Nasdaq 100 futures rose 0.2%

• Futures on the Dow Jones Industrial Average rose 0.1%

• The MSCI Asia Pacific Index rose 1.6%

• The MSCI Emerging Markets Index rose 2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0847

• The Japanese yen was little changed at 157.26 per dollar

• The offshore yuan was little changed at 7.2608 per dollar

• The British pound fell 0.1% to $1.2725

Cryptocurrencies

• Bitcoin rose 1.6% to $68,859.74

• Ether rose 0.8% to $3,814.14

Bonds

• The yield on 10-year Treasuries was little changed at 4.49%

• Germany’s 10-year yield declined one basis point to 2.65%

• Britain’s 10-year yield declined one basis point to 4.31%

Commodities

• Brent crude was little changed

• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess.

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