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Asian Shares Advance As Fed Jitters Ease

Asian stocks advanced on Tuesday after New York Fed President John Williams noted the recent inflation surge is likely a temporary phase, helping ease investor concerns about the pace of expected monetary tightening.

Chinese shares ended notably higher, with the benchmark Shanghai Composite index rising 28.23 points, or 0.80 percent, to 3,557.41. Hong Kong’s Hang Seng index dropped 179.24 points, or 0.63 percent, to 28,309.76.

Japanese shares posted strong gains on economic recovery hopes. The Nikkei average jumped 873.20 points, or 3.12 percent, to 28,884.13, marking its biggest percentage gain since June last year. The broader Topix index closed 3.2 percent higher at 1,959.53, reversing Monday’s 2.4 percent slide.

Shipping stocks surged, with Mitsui OSK Lines climbing more than 10 percent after the company more than tripled its half-yearly net profit forecast. Rivals Kawasaki Kisen and Nippon Yusen also gained more than 10 percent each.

Automaker Suzuki Motor surged 7.4 percent, Honda Motor rallied 3.6 percent and Toyota Motor added 3.3 percent as the yen fell against the dollar on improved risk sentiment.

Market heavyweight SoftBank Group advanced 1.9 percent and Uniqlo operator Fast Retailing climbed 3.1 percent.

Australian markets rallied as investors favored value stocks on hopes they will do well in an economic recovery. The benchmark S&P/ASX 200 index climbed 106.90 points, or 1.48 percent, to 7,342.20 while the broader All Ordinaries index ended up 107.50 points, or 1.44 percent, at 7,592.70.

Energy stocks such as Woodside Petroleum and Santos jumped 2-3 percent as Brent oil hit $75 a barrel for the first time in more than two years amid signs of a rapidly tightening market.

The big four banks rose 1-2 percent while mining heavyweights BHP and Rio Tinto rallied 2.4 percent and 1.6 percent, respectively. Gold miner IGO surged 6.2 percent after saying it plans to invest A$1.4 billion into its local unit.

Seoul stocks rebounded on expectations the Fed is going to be relatively slow in tapering its asset purchase program. The Kospi average inched up 23.09 points, or 0.71 percent, to 3,263.88. Automaker Hyundai Motor jumped 3.4 percent and chemical firm LG Chem advanced 2.4 percent.

Producer prices in South Korea were up 6.4 percent year-on-year in May, the Bank of Korea said – accelerating from the upwardly revised 6.0 percent increase in April.

New Zealand shares eked out modest gains, with the benchmark NZX 50 index finishing up 35.44 points, or 0.28 percent, at 12,534.80. Fisher & Paykel Healthcare gained 1.9 percent, while Trustpower slumped 4.3 percent, a day after it agreed to sell its electricity, gas, broadband and mobile retail business.

U.S. stocks advanced overnight as banks and energy companies recovered some of last week’s steep losses following the Federal Reserve policy update.

U.S. Treasury yields dropped and the dollar’s rally paused after New York Federal Reserve Bank President John Williams said that the current economic recovery may be choppy and that he isn’t ready for the U.S. central bank to dial back the support it is giving the economy.

The Dow rallied as much as 1.8 percent to snap its five-day losing streak and post its best performance since early March, while the S&P 500 climbed 1.4 percent and the tech-heavy Nasdaq Composite index rose 0.8 percent.

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(Australia) Westpac Leading Index Signals Above Trend Growth

Australia’s economy is set to log a more sustainable above trend growth through the remainder of 2021 and 2022, according to Westpac report, released Wednesday.

The six-month annualized growth rate in the Westpac-Melbourne Institute Leading Index, slowed to 1.47 percent in May from 2.86 percent in April.

Over the second half of 2021, Westpac expects that annualised pace to slow further to 4.5 percent, while the next year growth is forecast at a more normal but still healthy 3.2 percent.

The second half growth forecast is still well above trend but more in line with the six month annualized growth rate of 1.47 percent which the leading index has printed for May.

The index growth rate has moderated to 1.47 percent in May from just under 5 percent six months ago.

Two components account for most of the move, namely US industrial production and total hours worked. Both saw extremely strong ‘reopening rebounds’ as COVID restrictions were eased late last year.

Other components showed a more mixed performances over the six month period. On the plus side, commodity prices continued to surge. Most other components tended to follow the wider them of normalising growth.

Bill Evans, chief economist at Westpac said, given the improved pulse of the economic data in 2021, as signaled by the Leading Index, it seems unlikely that the central bank would expect to have to wait until 2025 before it achieves the objectives necessary to justify the first cash rate increase since November 2010.

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European Shares Seen Opening On Cautious Note

European stocks are likely to open on a cautious note Friday after robust U.S. economic data boosted the dollar and bond yields.

Concerns about higher inflation and sooner-than-expected monetary policy tightening are back in focus, with New York Fed President John Williams saying that it makes sense for Fed officials to begin discussing their options for adjusting policy.

Asian markets traded mixed and gold hovered near two-week lows after seeing its worst tumble since February, while oil dropped from over two-year highs on concerns about the patchy roll-out of anti-coronavirus vaccinations around the globe.

It’s a busy day ahead on the economic calendar, with Eurozone retail sales for April and construction PMI figures from Germany due out later in the session.

ECB President Lagarde and FED Chair Powell are scheduled to speak and any chatter on monetary policy could sway the market mood.

In the United States, trading is likely to be driven by reaction to the monthly jobs report, which could have a significant impact on the outlook for monetary policy.

Economists expect the report to show employment jumped by 664,000 jobs in May after climbing by 266,000 jobs in April. The unemployment rate is expected to dip to 5.9 percent from 6.1 percent.

U.S. stocks ended lower overnight as upbeat private payroll, jobless claims and service sector activity data led to renewed concerns about the outlook for monetary policy. Investors also mulled over a new report that Biden may be open to a lower tax hike.

The Dow slipped 0.1 percent and the S&P 500 dropped 0.4 percent while the tech-heavy Nasdaq Composite lost 1 percent.

European stocks ended Thursday’s session broadly lower as upbeat euro zone business growth data fanned fears of rising inflation.

The pan European Stoxx 600 eased 0.1 percent. France’s CAC 40 index shed 0.2 percent and the U.K.’s FTSE 100 dipped 0.6 percent, while the German DAX rose 0.2 percent.

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A Soft Opening Predicted in European Markets

Exuberance in the European stock markets is expected to abate on Wednesday as equities brace for a cautious trading day amidst re-emergence of taper-talk from the U.S. Wednesday is expected to sober down the smart rally of Tuesday that witnessed DAX 30 closing at a record high, CAC 40 closing at a 21 year high, Italy’s FTSE MIB closing at 13 year high and Spain’s IBEX 35 hitting a 16 month high. Overnight, the NASDAQ had shed 0.23 percent and the Dow Jones Industrial Average had gained 0.13 percent as cautious investors weighed in growth optimism with inflation fears and Fedspeak revealed dwindling headroom for forbearance on the monetary policy front.

On Tuesday, the European indexes had recorded a smart rally with the DAX 30 surging by 0.95 percent, FTSE 100 strengthening by 0.82 percent; pan European Stoxx 600 adding 0.75 percent, CAC 40 rallying by 0.66 percent and the Swiss SMI gaining 0.63 percent. Gold declined from five month highs as Manufacturing PMI of 61.2 reflected robust economic recovery in the U.S. The yellow metal is currently trading at $1898 per troy ounce, slightly down from Tuesday’s close of $1900.

The Dollar Index recovered 0.09 percent from yesterday’s level of 89.83 and is currently at 89.91 while U.S. ten year bond yields remain stable at 1.61 percent reflecting receding fears of interest rate hardening in the U.S.

Brent Crude is trading near two year high of $70.40 levels, up from $70.25 level on Tuesday, primarily driven by forecasts of likely fall in inventory levels and the delay in supply of Iranian crude. Prospects of vaccine led rebound in major economies continue to outweigh the coronavirus second wave induced demand drop in Asia.

The American stock futures are trading in negative territory and so are India’s Sensex, Singapore’s STI and China’s Shanghai Composite. STI has corrected by 0.85 percent, Shanghai Composite has declined by 0.64 percent and BSE Sensex has lost 0.42 percent. However the mood is mixed and the Australian ASX 200 has traded 0.93 percent higher, whereas Japan’s Nikkei 225 has risen around 0.50 percent.

Markets also await the Retail Sales data for April from Germany, Unemployment Change for May from Spain, Consumer Credit, Mortgage Lending and Mortgage Approvals for April from U.K. and the IBD/TIPP Economic Optimism Index for June from the U.S. later today.

Monetary Policy stance and the way forward, likely to be enunciated by E.C.B. President and key U.S.Fed officials later today are likely to be singled out for scrutiny by stock markets, as stimulus curbs and inflation fears intermittently, loom and linger. Eurozone’s recent inflation reading rising above the ECB comfort level is bound to haunt markets, as investors weigh-in inflation worries and growth prospects in more and more economies that reopen.

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A Mixed Open Seen in European Shares

European stocks are set to open on a mixed note Tuesday, with U.K. markets seen falling as traders return to their desks after a long holiday weekend.

Asian stocks were mixed even as a slew of surveys signaled an ongoing expansion in regional manufacturing activity, thanks to recovery in global demand.

China’s Caixin PMI Manufacturing rose to 52.0 in May, up from 51.9 and above expectations for a score of 51.7.

South Korean shares led regional gains after data showed the country’s exports logged their sharpest expansion in 32 years in May.

On the COVID-19 front, India’s decision to ban vaccine exports has had a severe impact on 91 nations and several of them remain extremely susceptible to new strains of COVID, first discovered in India, the World Health Organization (WHO) has said.

An expert group convened by WHO has renamed COVID-19 variants with Greek letters to avoid stigma; Alpha, Beta, Gamma, Delta.

Gold prices rose to a near five-month high on dollar weakness. The offshore Chinese yuan held steady after retreating from a three-year high of 6.3526 per dollar reached on Monday, as China forced banks to keep more foreign currencies in reserve for the first time in over a decade.

Oil prices surged ahead of the latest OPEC meeting, while the British pound hit a three-year high against the dollar amid bets the U.K.’s economic recovery is gaining traction with the rollout of coronavirus vaccines.

Treasury yields ticked higher as investors await key American jobs data due out later this week in the face of uncertainty around the interplay between much-feared inflation and much hoped-for growth recovery.

Unemployment from Germany and final manufacturing Purchasing Managers’ survey results from major euro area economies are due later in the session, headlining a busy day for the European economic news.

European stocks fell on Monday as investors reacted to signs of rising inflation in Germany as well as soft data from China and Japan.

The pan European Stoxx 600 dropped half a percent. Germany’s DAX and France’s CAC 40 index both shed around 0.6 percent.

Markets in the U.K. and U.S. were closed for Bank Holiday and Memorial Day, respectively.

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New Zealand Central Bank Keeps Policy Unchanged

New Zealand’s central bank left its monetary policy unchanged on Wednesday, as widely expected, and agreed to cut its interest rates further if required as the economic outlook remains highly uncertain.

The Monetary Policy Committee of the Reserve Bank of New Zealand decided to keep the Official Cash Rate at 0.25 percent and the Large Scale Asset Purchase at NZ$100 billion. The Funding for Lending programmes were also kept unchanged.

The committee agreed to retain its current expansionary monetary setting until consumer price inflation will be sustained at the 2 percent target, and that employment is at or above its maximum sustainable level.

The MPC said it is prepared to lower the benchmark rate if required.

The committee observed that short-term data continues to be highly variable as a result of the economic impacts of COVID-19.

Over the medium-term, the outlook remains highly uncertain, determined in large part by both health-related restrictions, and business and consumer confidence, the MPC said.

Although disruptions to global supply chains and higher oil prices are leading to specific near-term price pressures, the medium-term inflation and employment would likely remain below its target in the absence of prolonged monetary stimulus.

“If the economy continues to improve as we anticipate, we suspect the Bank may end its purchases altogether around the end of this year” Ben Udy, an economist at Capital Economics, said. The economist expects the central bank to raise rates towards the end of next year.

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Central Bank of Singapore Maintains Monetary Policy

Singapore central bank retained its monetary policy stance as the policymakers viewed it appropriate amid weak outlook for core inflation and continuing economic recovery.

The Monetary Authority of Singapore decided to maintain a zero percent per annum rate of appreciation of the Nominal Effective Exchange Rate, or S$NEER. The width of the policy band and the level at which it is centered will be unchanged.

The MAS applies the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool.

As core inflation is expected to stay low this year, the central bank repeated that “an accommodative policy stance remains appropriate”. However, the bank omitted the phrase “for some time.”

Beyond the near-term pickup, MAS core inflation is set to climb only gradually for the rest of the year and come in at 0-1 percent in 2021, the bank estimated.

The central bank lifts its overall inflation forecast for this year to 0.5 percent -1.5 percent from -0.5 to 0.5 percent previously.

According to MAS, the city-state economy will grow at an above-trend pace this year, although the sectors worst hit by the crisis will continue to face significant demand shortfalls.

While GDP is set to continue recovering at a decent pace, a persistent output gap is likely to remain, keeping a lid on underlying price pressures, Alex Holmes, an economist at Capital Economics, said.

“As such, we suspect that the MAS will maintain its accommodative stance for at least the next year,” the economist added.

Advance Estimates released by the Ministry of Trade and Industry showed that the Singapore economy expanded 2.0 percent on a quarter-on-quarter basis in the first three months of 2021, but slower than the 3.8 percent increase in the fourth quarter of 2020.

On a year-ago basis, GDP rose marginally by 0.2 percent in the first quarter, after three consecutive quarters of decline, data showed.

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Today’s Tech Headlines

The Supreme Court ruled in favor of Google in its 10-year legal battle with Oracle. The 6-2 vote set a precedent that it’s not possible to copyright code or set limits on how software is built and distributed. Here’s how the landmark decision will shape the future of software. Plus, throughout the dispute, more than two dozen parties – including IBM and Microsoft – voiced their support for Google.

2. Tim Cook said Facebook’s objections to letting people pick whether or not to be tracked are “flimsy arguments.” In a new interview, the Apple CEO criticized Facebook’s arguments about Apple’s upcoming privacy features. Mark Zuckerberg and Cook have feuded for years over user privacy and antitrust concerns. Here’s where their rivalry began and everything that’s happened since.

3. Uber is battling DoorDash to rule food delivery. Uber’s CEO is trying to transform the company into the Amazon of local commerce and transportation. In our exclusive report, we detail the strategies Uber is using to overtake DoorDash and other rivals.

4. Elon Musk issued an “urgent” plea for more housing in Austin, Texas. As Tesla and SpaceX look to fill hundreds of jobs in the state, the CEO took to Twitter to call for more housing opportunities.

5. An NFT of a house just sold for over $500,000 – the world’s first crypto real-estate sale. In exchange for half a million dollars, the buyer received 3D files and clips of the NFT home – which can be uploaded to a virtual world and used as a home for an avatar. Take a look at the entirely digital home, known as the “Mars House.”

Speaking of Mars… NASA’s Mars helicopter survived its first night alone on the red planet. The helicopter, named Ingenuity, could pave the way for future space helicopters to explore new frontiers on other planets.

7. More companies – including PayPal and Starbucks – are accepting bitcoin as payment. Despite volatility warnings, major fast-food chains, big tech firms, and leading drink companies are embracing cryptocurrencies.

8. Tesla will soar 51% as huge first-quarter sales point to a looming “green tidal wave.” Pent-up demand for electric vehicles and President Biden’s green-energy agenda are catalysts for Tesla’s growth, analysts say.

9. Founders Fund VC Keith Rabois and Atomic’s Jack Abraham are building a new stealth startup: OpenStore. The new Miami startup will “provide instant liquidity to long-tail Shopify merchants.”

10. These are InstaCart’s top nine power players. As it prepares to file its IPO paperwork, Instacart is poaching talent from Uber Eats, Goldman Sachs, and Amazon. In light of its massive growth, we compiled a list of the top execs helping InstaCart dominate grocery delivery.

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S&P 500 To New Record Closing High Above 4,000

Stocks showed a strong move to the upside during trading on Thursday, with technology stocks helping to lead the way higher once again. With the upward move, the S&P 500 ended the session at a new record closing high above 4,000.

The major averages all closed firmly positive, although the tech-heavy Nasdaq posted a particularly strong gain. The Nasdaq soared 233.24 points or 1.8 percent to 13,480.11, while the S&P 500 jumped 46.98 points or 1.2 percent to 4,019.87 and the Dow climbed 171.66 points or 0.5 percent to 33,153.21.

The extended rally by technology stocks, as reflected by the spike by the Nasdaq, was partly in reaction to upbeat news out of the semiconductor sector.

Shares of Micron Technology (MU) surged up by 4.8 percent after the chipmaker reported better than expected fiscal second quarter results and provided upbeat guidance for the current quarter.

Taiwan Semiconductor (TSM) also showed a strong move to the upside after unveiling capacity expansion plans amid rising chip demand.

Tech stocks also benefited from a pullback by treasury yields, with the yield on the benchmark ten-year note moving notably lower after ending the previous session at its highest closing level in over a year.

Positive sentiment was also generated in reaction to a report from the Institute for Supply Management showing the pace of growth in U.S. manufacturing activity accelerated by much more than anticipated in the month of March.

The ISM said its Manufacturing PMI jumped to 64.7 in March from 60.8 in February, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to inch up to 61.3.

With the much bigger than expected increase, the Manufacturing PMI reached its highest level since hitting 69.9 in December of 1983.

Meanwhile, the Labor Department released a report showing first-time claims for U.S. unemployment benefits rebounded from their lowest level in a year in the week ended March 27th.

The report said initial jobless claims rose to 719,000, an increase of 61,000 from the previous week’s revised level of 658,000.

Economists had expected jobless claims to edge down to 680,000 from the 684,000 originally reported for the previous week.

The downwardly revised number of claims in the previous week was the lowest since the week ended March 14, 2020, just before the start of the coronavirus lockdowns.

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report for March.

Economists currently expect employment to jump by 647,000 jobs in March after climbing by 379,000 jobs in February. The unemployment rate is expected to drop to 6.0 percent from 6.2 percent.

Traders were also reacting to President Joe Biden’s speech regarding his $2 trillion infrastructure and economic recovery plan.

Sector News

Gold stocks moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 4.4 percent.

The rally by gold stocks came as the price of gold for June delivery climbed $12.80 to $1,728.40 an ounce, extending the rebound seen in the previous session.

Substantial strength was also visible among semiconductor stocks, as reflected by the 3.7 percent spike by the Philadelphia Semiconductor Index.

Oil stocks also showed a significant move to the upside on the day, with the NYSE Arca Oil Index surging up by 3.3 percent. The strength in the sector came as the price of crude oil for May delivery spiked $2.29 to $61.45 a barrel.

Software, brokerage and commercial real estate stocks also saw considerable strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index advanced by 0.7 percent, while Hong Kong’s Hang Seng Index spiked by 2 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index rose by 0.4 percent, the French CAC 40 Index and the German DAX Index climbed by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries rebounded after coming under pressure late in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.7 basis points to 1.679 percent.

Looking Ahead

Reaction to the monthly jobs report is likely to drive trading early next week, although reports on service sector activity, factory orders, the U.S. trade deficit, and producer prices may also attract attention.

The Federal Reserve is also scheduled to release the minutes of its latest monetary policy meeting, which may shed additional light on the Fed’s economic outlook.

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Thai Bourse May Crack Resistance At 1,600 Points

The Thai stock market bounced higher again on Thursday, one day after it had ended the five-day winning streak in which it had advanced more than 25 points or 1.6 percent. The Stock Exchange of Thailand now rests just shy of the 1,595-point plateau and it may extend its gains on Friday.

The global forecast for the Asian markets is upbeat, with technology and oil stocks expected to lead the markets higher. The European and U.S. bourses were up and the Asian markets are tipped to follow suit.

The SET finished modestly higher on Thursday following gains from the financial shares and a mixed performance from the energy producers.

For the day, the index rose 7.91 points or 0.50 percent to finish at 1,595.12 after trading between 1,590.33 and 1,600.60. Volume was 29.161 billion shares worth 76.941 billion baht. There were 798 decliners and 784 gainers, with 465 stocks finishing unchanged.

Among the actives, Thailand Airport skidded 1.09 percent, while Asset World dropped 0.98 percent, Bangkok Asset Management shed 0.46 percent, Bangkok Bank jumped 1.59 percent, Bangkok Expressway retreated 1.14 percent, BTS Group added 0.52 percent, Charoen Pokphand Foods sank 0.85 percent, Gulf gained 0.75 percent, Kasikornbank rallied 2.07 percent, PTT fell 0.61 percent, PTT Exploration and Production rose 0.44 percent, PTT Global Chemical improved 0.80 percent, Siam Commercial Bank collected 1.35 percent, Siam Concrete lost 0.50 percent, TMB Bank climbed 1.63 percent and Advanced Info, Bangkok Dusit Medical, Krung Thai Bank, PTT Oil & Retail and SCG Packaging were unchanged.

The lead from Wall Street is broadly positive as stocks opened higher on Thursday and gathered steam as the day progressed, closing near daily highs.

The Dow climbed 171.66 points or 0.52 percent to finish at 33,153.21, while the NASDAQ spiked 233.23 points or 1.76 percent to end at 13,480.11 and the S&P 500 jumped 46.98 points or 1.18 percent to close at 4,019.87.

The rally by technology stocks in the NASDAQ reflected solid earnings news and a retreat by treasury yields, with the yield on the benchmark ten-year note moving lower after ending the previous day at its highest closing level in a year.

Traders were also reacting to President Joe Biden’s speech regarding his $2 trillion infrastructure and economic recovery plan.

In economic news, the Institute for Supply Management said U.S. manufacturing activity accelerated more than expected in March. Also, the Labor Department said first-time claims for U.S. unemployment benefits rebounded from their lowest level in a year last week.

Crude oil prices moved sharply higher Thursday on news that OPEC has agreed to incremental increases in crude production for three months starting in May. West Texas Intermediate Crude oil futures for May ended higher by $2.29 or 3.9 percent at $61.45 a barrel.