2023-06-05 00:51:15
© Archyde.com. FILE PHOTO: A man walks past an electric monitor displaying Nikkei share average and the Japanese yen exchange rate once morest the U.S. dollar outside a brokerage in Tokyo, Japan May 2, 2023. REUTERS/Issei Kato
By Stella Qiu
SYDNEY (Archyde.com) – Asian shares extended a global rally on Monday on optimism the Federal Reserve would pause its rate hikes this month following a mixed U.S. jobs report, while oil jumped as Saudi Arabia pledged big output cuts in July.
jumped $1.82, or 2.4%, to $77.95 a barrel, while climbed $1.77, or 2.4%, to $73.51. Oil prices have recently come under pressure amid heightened concerns regarding China’s slowing economic recovery. [O/R]
Oil rose as Saudi Arabia announced it would cut its output to 9 million barrels per day in July, from around 10 million bpd in May, the biggest reduction in years, while a broader OPEC+ deal to limit supply into 2024 also underpinned futures.
“With Saudi Arabia protecting oil prices from sliding too low … we think oil markets are now more prone to a shortfall later this year,” said Vivek Dhar, a mining and energy commodities strategist at Commonwealth Bank of Australia (OTC:).
“We think Brent futures will rise to $US85/bbl by Q4 2023 even with a tepid demand recovery in China factored in.”
On Monday, surged 1% to a 33-year high, Australia’s resources-heavy shares gained 1% and South Korea’s rose 0.5%.
dipped 0.1% and Nasdaq futures dropped 0.3% in Asian hours, following a strong rally on Friday, driven by a mixed U.S. jobs report, a resolution to the debt-ceiling issue and the prospect of a U.S. rate pause this month.
The tech-heavy Nasdaq rose 1% on Friday and posted its sixth-straight week of gains that marked its best winning streak since January 2020, while the Dow Jones gained 2%, and the added 1.45%.
Data on Friday showed U.S. economy added 339,000 jobs last month, higher than most estimates, bolstering expectations of Fed hikes in July, with markets tipping a 50% chance for that.
However, moderating wage growth and rising jobless rate in Friday’s jobs report argued for a case of pause in June.
Markets are still leaning towards a rate pause from the Fed at the next policy meeting, but have priced out almost any chance of a rate cut by the end of this year.
Yields on U.S. two-year Treasuries surged 16.2 basis points on Friday to 4.503% and ten-years rose 8 bps to 3.6903%, in part driven by Fitch Ratings saying the U.S.’ “AAA” credit rating would remain on negative watch, despite the debt agreement.
That in turn helped the dollar gain 0.5% on Friday and stay elevated at 104.16 once morest its peers early on Monday. The greenback jumped 0.8% on Japanese yen to 139.94 while the euro eased 0.5% to $1.0706.
The Australian dollar was an outperformer once morest a strong greenback, up 0.5% to $0.6605, on bets that the Reserve Bank of Australia will have to raise rates higher and for longer on domestic wage pressures.
The RBA will hold a policy meeting on Tuesday. In the wake of a strong increase in the minimum wages for the next financial year, markets are now split on whether it would hold rates steady or hike it further to 4.1%.
The Bank of Canada will meet on Wednesday. A majority of economists polled by Archyde.com expect the BOC to keep interest rates on hold at 4.5% for the rest of the year but the risk of one more rate hike was high.
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