SYDNEY- Asian shares edged up on Monday while bond markets held their breath ahead of an update on the US rate outlook from the world’s most powerful central banker, and a jobs report that could decide if the next hike needs to be super-sized.
There was some disappointment that Beijing chose to lowball its growth outlook with a target of 5 percent, rather than the 5.5 percent-plus favoured by the market, but the recent run of actual data has been strong enough to keep investors optimistic.
Chinese blue chips slipped 0.5 percent, having gained 1.7 percent last week. MSCI’s broadest index of Asia-Pacific shares outside Japan was still up 0.7 percent.
Japan’s Nikkei climbed 1.2 percent to a three-month top, while South Korean stocks added 1.0 percent helped by a softer reading on inflation.
EUROSTOXX 50 futures firmed 0.5 percent, while FTSE futures held steady. S&P 500 futures gained 0.2 percent and Nasdaq futures 0.4 percent, after rallying on Friday as bond yields eased back a little.
Yields on 10-year Treasuries stood at 3.94 percent, after last week’s spike to 4.09 percent proved tempting enough to attract buyers.
Markets have become resigned to more rate rises from the Federal Reserve but are hoping it will stick with quarter-point moves rather than switch back to half-point hikes.
San Francisco Fed President Mary Daly on Saturday reiterated rates would have to go up but set a high bar for moving to half-point increases.
Futures imply a 72 percent chance the Fed will go by 25 basis points at its meeting on March 22.
All of which sets the scene for Fed Chair Jerome Powell’s testimony to congress on Tuesday and Wednesday, where he will no doubt be quizzed on whether larger hikes are needed.
Much, however, might depend on what the February payrolls report reveals on Friday.
Forecasts are centered on a more modest increase of 200,000 following January’s barnstorming 517,000 jump, but risks are on the upside. – Reuters
