Asian Stocks to Rise After Wall Street Win Streak: Markets Wrap

1 month ago

(Bloomberg) -- Most Asian stocks are poised to rise in early trading Monday after Wall Street finished last week on fresh highs.

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Australian shares opened higher, with equity futures in Japan and mainland China also pointing to gains. US contracts rose after the S&P 500 notched up a sixth straight weekly increase, the best streak this year following a slew of corporate results and signs the world’s top economy remains robust. Hong Kong contracts signal declines.

Traders will be closely watching China ahead of an expected 20 basis point reduction in the one-year and five-year loan prime rates on Monday. The cut comes as investors grow skeptical over a fleeting recovery in Chinese stocks following a swath of stimulus measures.

“How influential further easing proves to be in China and Hong Kong equities and the yuan is up for debate, as market participants may be feeling a sense of policy easing fatigue,” said Chris Weston, head of research at Pepperstone Group in Melbourne.

Oil was steady in early trading after Israel vowed retaliation towards Iran following a precise Hezbollah drone attack targeting the private residence of Prime Minister Benjamin Netanyahu. Crude dropped 8.4% last week, the biggest weekly drop in a year, as the US revived a push to end the conflict in the Middle East and as China’s oil demand slipped.

“The near-miss on Netanyahu ratchets up geopolitical tensions,” said Kyle Rodda, a senior analyst at Capital.com in Melbourne. However, prices suggest “that the risks of disrupted energy supply is small, with oil traders more greatly concerned about the downgrade to demand forecasts from the IEA and OPEC.”

Possible escalation in the conflict comes as finance ministers and central bank chiefs gather in Washington this week for the annual meeting of the International Monetary Fund and World Bank. Hanging over the meeting is the grinding Russia-Ukraine war and a toss-up US presidential election that offers starkly different economic outcomes for the world.

Elsewhere in Asia, Malaysia’s politicians are bracing for protests after committing to rolling back fuel subsidies from next year which also risk stoking inflation. Traders will also be closely watching the Indonesian rupiah after the nation’s new President Prabowo Subianto confirmed Sri Mulyani Indrawati will stay on as finance minister, a sign of policy continuity in Southeast Asia’s largest economy.

The reappointment of Indrawati in Prabowo’s administration “should be perceived positively by markets in terms of Indonesia’s medium-term fiscal consolidation narrative,” Barclays Plc strategists led by Themistoklis Fiotakis wrote in a note to clients.

In US earnings this week, Tesla Inc. faces questions on its production targets and regulatory challenges after the unveiling of its much-hyped Cybercab failed to enthuse investors and quell concerns over its recent vehicle sales.

Boeing Co. will also have to sooth investors increasingly concerned over production delays, depleted financial resources and labor strife. Striking workers will vote on Oct. 23 to ratify a tentative agreement on a new contract the company and their union reached at the weekend, including a wage increase of 35% spread over four years.

Investors are positioning for the US election in about two weeks as odds tilt toward both Donald Trump winning the White House and Republicans controlling Congress. Traders have already begun ramping up bets on assets which had thrived in the wake of the former president’s 2016 victory, and are now looking to the impact on proposed policies including a lift in trade tariffs.

“The clearest expression of Trump tariff risk remains long US dollar versus Mexican peso, Chinese yuan and euro,” Pepperstone’s Weston said. While the polls indicate a tighter race than signaled by betting markets, “for some, Trump’s implied lead may be tough to ignore and could result in increased hedging of tariff risk through the week,” he said.

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