Asian equity markets are poised for a strong start to the week as China returns from a three-day holiday and the softer-than-expected US jobs report fuels expectations of a Federal Reserve rate cut. US stock futures are on the rise following a 1.3% gain in the S&P 500, with Australian and Hong Kong markets also pointing to gains on Monday. Chinese shares listed on the Nasdaq surged 5.5% last week, indicating a positive opening for mainland markets. Japanese markets, however, are closed for a holiday.
The optimism in the markets follows a second consecutive week of global stock gains. US Treasuries rallied after the release of the payrolls report, easing concerns of stagflation or a recession. The weaker-than-expected data points last week, including jobs, services, and manufacturing, have led to a decline in the US version of Citigroup’s Economic Surprise Index. Nonfarm payrolls saw a modest increase of 175,000 in April, the smallest gain in six months.
“The market has gained greater confidence that the US economy is not indeed overheating,” said Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne. “Conviction levels may still be low, but the platform is in place for risky assets to move higher this week, notably if truce talks in Gaza gain real traction.”
Oil prices have also seen an uptick following Israel’s closure of the Kerem Shalom humanitarian crossing into Gaza after a rocket barrage by Hamas. Saudi Arabia has raised the price of crude sold to Asia in an effort to tighten the oil market.
Traders will be keeping an eye on central bank meetings this week, starting with the Reserve Bank of Australia on Tuesday. Chinese activity data and inflation readings in key emerging markets are also on the agenda.
Overall, the markets are showing signs of positivity as investors look ahead to a potentially eventful week filled with economic data releases and central bank decisions.
