Daily Management Review

Metals And Equities Rise As Prospects Of A Rate Cut Solidify


Metals And Equities Rise As Prospects Of A Rate Cut Solidify
Asian stocks reached two-year highs on Monday, while records were set for copper and gold as investors bet on impending interest rate cuts and China ramping up measures to stabilise its faltering real estate industry.
Following the death of Iran's president in a helicopter accident and the announcement by Saudi state media that the monarch of Saudi Arabia has a health concern, Brent oil futures surged to a one-week high of $84.25 per barrel, raising the possibility of further Middle East upheaval.
Copper futures jumped over 7% in Shanghai to a record 88,940 yuan a tonne and sold for $11,104.50 in London, while gold increased more than 1% to $2,449.89.
ANZ analysts highlighted that strong global growth and limited supply were boosting copper prices, while record-breaking imports of 566 tonnes of gold into China during the first quarter also helped.
The world's stocks were only a hair away from last week's record levels, Japan's Nikkei jumped 0.7% and set a five-week high, while MSCI's broadest index of Asia-Pacific equities outside of Japan saw a 0.4% increase.
European and FTSE futures, as well as S&P 500 futures, all increased by 0.1%.
China unveiled "historic" measures on Friday to stabilise its real estate market, with local governments planning to purchase certain units and the central bank arranging an additional 1 trillion yuan ($138 billion) in funding. As anticipated, it kept benchmark rates unchanged.
The attention of investors has shifted from last week's cheerleading about a slowing in U.S. inflation to policy statements, meeting minutes, a central bank decision in New Zealand, and Nvidia results. European authorities have been hinting at rate cuts as early as June.
Bob Savage, head of markets strategy and analytics at BNY Mellon, said, "The Fed speakers and (Fed) minutes will pivot on how they paint the picture of policy risks ahead, with a bias to ease rather than hike essential."
In Asia trade, the yield on two-year U.S. Treasury notes remained stable last week, closing four basis points (bps) lower at 4.825%. US ten-year rates dropped 8.4 basis points to 4.42% last week.
Government bond yields in Japan are at their highest level in over ten years as a result of rising anticipation on the other side of the Pacific that rates there may rise above zero.
Ten-year rates increased by 2.5 basis points to 0.975%, the highest level since 2013, but the unfavourable yen saw no movement because to the large difference with U.S. yields.
"Something has to give, and if the Bank of Japan has to start to increase interest rates, and that means long end yields will also have to adjust higher as well, and I think we're starting to see that," Khoon Goh, ANZ's head of Asia research
Although the dollar saw its worst weekly decline against the euro in two and a half months last week on currency markets, morning trade in Asia on Monday saw little change.
On Monday, the euro was slightly higher at $1.0880. The yen remained stable at 155.70 to the dollar.
The New Zealand dollar was trading at $0.6127, while the Australian dollar increased 1.4% last week and remained at $0.6697 on Monday. On Wednesday, the Reserve Bank of New Zealand will likely maintain its main cash rate at 5.5% when it sets interest rates.
The Federal Reserve and the central bank of Australia both have to submit meeting minutes. This week's flash global PMIs are also available.
Unrest in New Caledonia affected other commodities as well. Nickel, the country's main export, saw price increases due to silver's pursuit of gold, which broke beyond $30.