Amidst anticipation of a global manufacturing resurgence, industrial metals prices continued to rise on Tuesday. Meanwhile, Asian shares increased somewhat more cautiously ahead of this week's U.S. inflation data and an important meeting of the European Central Bank.
The Asia-Pacific equities MSCI broadest index outside of Japan increased by 0.2%. Tokyo's Nikkei gained 0.6%. At a two-year high, Shanghai copper futures were up 1%, marking a month-long rise of more than 10%. On Monday, aluminum reached a 22-month high in Shanghai, whilst zinc reached a five-month high.[MET/L]
Despite being hit hard by China's real estate slump, iron ore prices in Singapore remained over $100 per tonne.[IRONORE/]. According to Vishnu Varathan, head of economics at Mizuho Bank in Singapore, "it's pretty much a China bet."
It also happened to coincide with a bottom in global manufacturing, which I believe will help China's industrial comeback. That part of it is a metals-based tale on a larger scale." Data released on Monday indicated that German industrial production increased in February more than anticipated.
Data from last week indicated that American manufacturing was expanding for the first time in a year and a half. In March, China's industrial output increased for the first time in six months.
The price of precious metals has also surged, with gold currently trading just below its record high of $2,353 set on Monday. This year, spot gold has increased by over 14%. [GOL/]. On Monday, silver reached its highest level since the middle of 2021, while platinum also surged. Although down recent highs, Brent oil is still trading at $90.62, above $90 a barrel.
Even while China proxies like the Antipodean currencies have been rising and Hong Kong's Hang Seng was 1.2% higher in early trading, Chinese equities have not joined the celebration.
Tuesday's transaction price of $0.6605 for the Australian dollar puts it up over 2% in only one week. In early trading, the New Zealand dollar recovered its footing above $0.60 and reached a two-week high of $0.6047.
China's yuan has found a floor at about 7.3 to the dollar, after declining by 1.8% this year.
ECB AND CPI AHEAD
This week's key events for the world's stock markets, bonds, and currencies are the European Central Bank meeting on Thursday and the U.S. inflation data that is scheduled for release on Wednesday.
The markets had anticipated rate reduction of more than 150 basis points in January, but now investors are unsure of half that amount. Expectations for U.S. rate cuts have been dwindling.
Headline for the year Inflation in the United States is predicted to increase from 3.2% to 3.4% in March. U.S. two-year yields, which reflect expectations for short-term interest rates, are at 4.801%, the highest level since late November, while on Monday, ten-year yields reached 2024 highs of 4.46%.
The euro is holding steady in case the ECB surprises markets by raising interest rates, while commodity currencies are rising, making it difficult for the dollar to keep up with the rate increases.
The euro is trading at 1.0860.
While a rate decrease that the markets have priced for June is anticipated, the ECB is expected to keep interest rates. "A stabilisation around $1.0800 in the near term remains likely in EUR/USD, although drops to $1.07 or lower look more likely than a break higher to $1.09/1.10," ING strategists stated
Meanwhile, investors continue to put significant pressure on the yen, viewing any delays in global rate reduction as creating a huge disparity with Japan's near-zero interest rates.
The yen is only slightly above its 34-year low of 151.975 set last month, at 151.87 to the dollar. At 164.96, the yen is at its lowest level against the euro in three weeks.
Japanese Finance Minister Shunichi Suzuki reiterated his warning that Tokyo is prepared to take action against the currency's recent strong losses and stated that authorities will not rule out any alternatives in dealing with excessive yen swings.
According to a note sent to investors by Standard Chartered strategist Steve Englander, "We expect (Japan) to intervene above 152, but not immediately on a break."