SYDNEY- Asian share markets rallied on Monday as investors looked forward to a rate cut in Europe, and quite possibly Canada, as the next step in global policy easing, though sticky inflation threatens to make the process a drawn out affair.
There was also better news from China as the private Caixin survey showed a pick-up in its main factory index to a two-year top of 51.7 in May, from 51.4 in April.
Japan’s factory activity expanded for the first time in a year in May, while activity in South Korea grew at the fastest pace in two years.
All of which helped MSCI’s broadest index of Asia-Pacific shares outside Japan bounce 1.4 percent , having slid 2.5 percent last week. Chinese blue chips added 0.3 percent .
Japan’s Nikkei rose 1.1 percent , after rebounding from one-month lows on Friday, while South Korea gained 1.8 percent .
South Korean President Yoon Suk Yeol on Monday flagged the possibility of a vast amount of oil and gas reserves in the sea off the country’s east coast.
Indian markets are waiting to see if Prime Minister Narendra Modi will expand his alliance’s majority in parliament when election results are released on Tuesday, amid speculation this would lead to more economic reforms.
EUROSTOXX 50 futures climbed 0.9 percent and FTSE futures 0.7 percent as the risk-on mood spread.
Month-end flows saw Wall Street stage a late rally on Friday and left the Nasdaq up almost 7 percent for May. Early on Monday, S&P 500 futures were up 0.2 percent , with Nasdaq futures adding 0.1 percent .
The prospect of lower borrowing costs globally has been generally positive for equities.
The European Central Bank (ECB) is considered almost certain to trim rates by a quarter point to 3.75 percent on Thursday, the first time in history it would have eased ahead of the US Federal Reserve.
However, a surprisingly high reading for euro zone inflation out last week blunted hopes for a rapid round of reductions and markets have 57 basis points of easing priced in for this year.
“The probability of back-to-back cuts now appears very low, putting the focus for a second move on September,” said Bruce Kasman, head of economic research at JPMorgan.
