Global shares rose on Monday, lifted by a growing expectation that the Federal Reserve will not raise interest rates anymore and by hopes that China’s steady drip feed of policy stimulus might stabilize the economy. The benchmark Shanghai Composite index rose 2.1 percent, leading gains across Asia. At the same time, a holiday in the United States, they have kept a lid on activity ahead of critical readings on U.S. services and Chinese trade and inflation later this week.
Investors were encouraged by a report on the weekend by Wall Street Journal reporter Nick Timiraos, known as “Fed Whisperer,” who wrote that a raft of factors, including lower energy prices and easing supply chain bottlenecks, had helped to slow global inflation. The Institute for Supply Management (ISM) reported that its services sector index rose to a five-month high in January, but a decline in manufacturing input price inflation offset that.
Meanwhile, in Europe, investors continued to focus on the state of the global economy as Italy’s budget row and tension over the death of a Saudi journalist put pressure on the euro. The FTSE 100 closed down 0.4 percent, with energy stocks among the biggest losers after oil prices fell on worries over demand and a snowstorm forecast to hit travel in the United States.
In Japan, the Nikkei Stock Average made a fresh post-bubble high, lifted by chip stocks and retailers regaining confidence in their business prospects. But the rally in Tokyo was tempered by lingering concerns about the state of the global economy and the impact of the continuing trade dispute between the United States and China.
On the currency markets, the yen rebounded after the Bank of Japan widened the trading band for 10-year bond yields to 50 basis points either side of zero. The move was widely expected and was aimed at supporting growth while also helping to keep the yen low against the dollar in the wake of a sell-off in bonds.
In the oil market, crude prices increased after data showed a bigger-than-expected draw in U.S. crude inventories. Still, gains were capped by concerns over slowing demand in China and a forecast of a snowstorm hitting U.S. travel. Gold rose after a sharp sell-off on Friday but was held back by a lack of haven buying. In other commodities, copper prices dropped due to the slump in Chinese demand, while a rise in inventories hurt rubber prices. This week’s focal point will be the release on Wednesday of the ISM services sector PMI and a speech by Fed Governor Christopher Waller, who has previously advocated for further rate hikes. Investors will also watch for the outcome of an IPO by chipmaker Arm Holding on Tuesday. The offering could be a bellwether for investor sentiment towards the wider global tech sector. The IPO is expected to value the firm at around $50 billion.