inflation data and the first House testimony by the new head of the Federal Reserve.SYDNEY, Feb 26 — Asian shares made guarded gains today as investors braced for an event-packed week headlined by US
Spread betters also pointed to a stronger start for Europe and FTSE futures were already 0.5 per cent higher.
But sentiment was fragile, with the dollar reversing its early rise and safe-haven bonds firming as E-Mini futures for the S&P 500 turned flat.
MSCI’s broadest index of Asia-Pacific shares outside Japan crept up 0.6 per cent, with most bourses in the green.
Japan’s Nikkei led with an increase of 1.3 per cent, while Chinese blue chips added 0.7 per cent.
China’s ruling Communist Party yesterday set the stage for President Xi Jinping to stay in office indefinitely, with a proposal to remove a constitutional clause limiting presidential service to just two terms in office.
Investors initially took heart from Friday’s rally on Wall Street which saw the VIX volatility index end at 16.49 per cent, far below the 50 per cent peak touched at the height of market turmoil in early February.
The mood has calmed partly thanks to expectations the Federal Reserve will stay gradual in its tightening, a measured outlook underlined by the central bank in a governors’ report released on Friday.
Investors also seem to be wagering that Fed Chairman Jerome Powell will stick to that script at his first appearance before the House tomorrow, followed by testimony to the Senate on Thursday.
“Powell will be highly cognisant of the spike in risk aversion in late January and will be keen not to rock the boat too greatly,” argued Chris Weston, chief market strategist at broker IG.
“Futures markets on Friday were pricing in less implied policy tightening from the Fed in the years ahead, suggesting traders are not expecting Powell to signal a more aggressive response.”
Wary on inflation
Yields on US 10-year Treasuries had also backed off to 2.85 per cent and away from a four-year top of 2.957 per cent.
An added wrinkle is that the Fed’s favoured measure of inflation, the core personal consumption expenditure (PCE) index, is out early on Thursday.
Markets will be hyper-sensitive to any hint of a pick-up in core inflation given the surprising strength of wages in January and Powell is certain to be questioned on the risks by Senators.
In currency markets, the US dollar surrendered early gains to dip 0.2 per cent on a basket of currencies to 89.730. That followed a 0.8 per cent bounce last week.
It also retreated on the yen to reach 106.66, failing to hold an early 107.28 top amid selling by Japanese exporters for month-end.
The euro was firmer at US$1.2314 (RM4.81), just above last week’s trough at US$1.2258, with ECB President Mario Draghi set to appear before the European Parliament later in the day.
Dealers were also looking ahead to the outcome of the Italian general election on March 4.
A German Social Democrats’ poll of its members on joining another coalition government with Chancellor Angela Merkel’s conservatives is also due that day, two big political risk events for markets.
In commodities, the lapse in the dollar helped spot gold bounce 0.6 per cent to US$1,336.94 per ounce.
Oil prices extended gains to hit their highest level in nearly three weeks today, supported by comments from Saudi Arabia that it would continue to curb exports in line with the Opec-led effort to cut global supplies.
US crude futures added 25 cents to US$63.80 a barrel, while Brent futures rose 15 cents to US$67.46. — Reuters
Source: The Malay Mail Online