Eye Fed Asian shares bounce back after Powell’s speech: Closing markets

(Bloomberg) — Most Asian stocks look poised to gain early Monday after Wall Street was buoyed by signals from Federal Reserve Chairman Jerome Powell that U.S. interest rates will be cut starting next month.

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Futures show benchmarks in Hong Kong and Sydney stocks are rising, although Tokyo shares could fall. Most regional bourses are expected to benefit from Powell’s speech in Jackson Hole on Friday, when he said “the time has come” to move toward monetary easing. U.S. equity contracts eased in early trading. Australian bonds rose.

Traders will also be closely watching rising tensions in the Middle East, with Israel preparing for a wide-ranging conflagration that could involve Iran and its allied militias. Oil rose 0.4% early Monday.

While markets have already priced in the start of policy easing in September, investors welcomed Powell’s comments. All major groups in the S&P 500 gained, with the gauge rising more than 1%. An MSCI index of global shares hit an all-time high. Bloomberg’s “Magnificent Seven” index of megacaps rose 1.7 percent. The Russell 2000 of small companies rose 3.2%.

Over the weekend, Israel declared a 48-hour state of emergency and closed its main airport for several hours, with numerous foreign airlines canceling flights. About 100 Israeli warplanes flew over southern Lebanon, destroying thousands of Hezbollah rocket launchers in what was called a pre-emptive strike.

In currency markets, the Japanese yen rose 0.5% on Monday. The country is also bracing for typhoon Shanshan, which will hit the west coast on Wednesday, causing up to $10 billion in damage and losses from wind, storm surge and flooding rains.

“Green Light”

Some Fed watchers indicated there were devils in the details of Powell’s speech. While he acknowledged recent progress on inflation and saw the economy growing at a “solid pace”, his focus on the “cooling of the labor market” caught the eye of many market watchers. Basically, it was seen as an indication that the Fed will do everything possible to avoid a pronounced slowdown.

“The market should be pleased with this speech as it was in no way solicitous, it gave the green light for cuts of 25 basis points – and left the door open for further cuts if that becomes necessary” , said Chris Zaccarelli at the Alliance of Independent Counsel.

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Swap traders on Friday priced in 102 basis points of easing this year, implying a cut at each remaining policy meeting through December, including a jumbo cut of 50 basis points. A rise in Treasuries was led by shorter maturities, with the two-year yield falling below 4%. The dollar lost 1%.

Gold jumped as much as 1.3% after Powell’s speech and remains within striking distance of a new all-time high. It changed a little early Monday.

Key events this week:

• China’s medium-term lending operations on Monday

• Singapore industrial production on Monday

• US Durable Goods, Monday

• China industrial profits on Tuesday

• German GDP on Tuesday

• Trade with Hong Kong, Tuesday

• CPI Australia on Wednesday,

• Nvidia Corp. earnings on Wednesday

• US GDP, Initial Jobless Claims Thursday

• US personal income, spending, PCE price data, Friday

Some of the main movements in the markets:

Stocks

• Hang Seng futures were up 0.6 percent as of 8:04 a.m. Tokyo time

• Nikkei 225 futures fell 0.3%

• S&P/ASX 200 futures up 0.5%

• S&P 500 futures fell 0.1%

Coins

• The Bloomberg Dollar Spot Index was little changed

• The Japanese yen rose 0.5 percent to 143.70 per dollar

• The euro was unchanged at $1.1192

• The offshore yuan was little changed at 7.1146 per dollar

Cryptocurrencies

• Bitcoin rose 0.6% to $64,605

• Ether rose 0.2% to $2,776.5

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