SYDNEY- Asian shares rallied for a fourth straight session on Monday after markets priced in earlier rate cuts in the United States and Europe, bullish wagers that will be tested by a swarm of central bank speakers this week.
Battered bond markets also enjoyed a welcome recovery as a benign US payrolls report and upbeat productivity numbers suggested the labor market was cooling enough to obviate the need for further rate increases from the Federal Reserve.
“This year’s better-than-expected US supply-side performance raises hopes for a soft landing,” said Bruce Kasman, head of economic research at JPMorgan.
“By encouraging disinflation, strong productivity and labor supply gains might allow for job growth and low inflation to coexist,” he added. “This, in turn, would open the path for early Fed easing.”
Futures markets swung to imply a 90 percent chance the Fed was done raising rates, and an 86 percent chance the first policy easing would come as soon as June.
Markets also imply about an 80 percent probability the European Central Bank will cut rates by April, while the Bank of England is seen easing in August.
Central bankers have their own chance to weigh in on this dovish outlook, with at least nine Fed members speaking this week, including Chair Jerome Powell. Also on the docket are speakers from the BoE and ECB.
An odd man out is Australia’s central bank, which is considered likely to resume raising rates at a policy meeting on Tuesday as inflation stays stubbornly high.
The Bank of Japan is also on the road to tightening, albeit at a glacial pace. The head of the central bank on Monday said they were closer to achieving their inflation target, but it was still not enough to end ultra-loose policy.
Elsewhere, hopes for lower borrowing costs helped MSCI’s broadest index of Asia-Pacific shares outside Japan gain 2.0 percent , having already rallied 2.8 percent last week and away from one-year lows.
Japan’s Nikkei rose another 2.4 percent , after jumping 3.1 percent last week, while South Korea climbed 4.3 percent as authorities re-imposed a ban on short-selling to mid-2024.