Japanese stocks hit their highest point in 33 years
Stocks in Japan hit their highest levels since 1990 on Monday, driven by strong earnings and international demand, while China's central bank pushed the yuan higher. The Nikkei remained stable after surpassing its September high, increasing 8.8% for the month so far, with the Topix closely following. Financial stocks led the surge as investors anticipated an eventual end to negative rates and automakers profited from a weak yen and increased exports.
Asia-Pacific shares outside Japan edge up
The MSCI's broadest index of Asia-Pacific shares outside Japan rose slightly by 0.1%, having gained 2.8% last week to reach a two-month peak. Chinese blue-chip stocks dipped 0.2% as the nation's central bank maintained rates as expected but set a strong fix for the yuan, causing the dollar to fall below 7.2 to a three-month low. EUROSTOXX 50 futures inched up 0.1%, while FTSE futures were marginally stronger.
S&P 500 futures ease, NASDAQ futures lose ground
S&P 500 futures slipped 0.1% and NASDAQ futures dropped 0.2%. This year, the S&P has surged nearly 18%, close to its July peak by just under 2%. Goldman Sachs analysts observed that the "Magnificent 7" mega-cap stocks have yielded a 73% return for the year so far, compared to only 6% for the remaining 493 companies. They predict that mega-cap tech stocks will continue to outperform due to their superior expected sales growth, margins, reinvestment ratios, and balance sheet strength.
US economic data and Federal Reserve minutes in focus
Federal Reserve's last meeting minutes will provide some insight into policymakers' thoughts as they kept rates steady for a second time. Markets have almost ruled out the possibility of another hike in December or next year, and suggest a 30% chance of easing beginning in March. Futures also indicate around 100 basis points of cuts for 2024, up from 77 basis points before the mild October inflation report impacted markets.
European manufacturing surveys will be watched closely this week
This week, important surveys on European manufacturing will be watched closely. Any indications of weakness could lead to increased expectations for the European Central Bank to cut rates sooner. Markets are predicting a roughly 70% chance of a cut as soon as April, despite ongoing discussions among many ECB officials about the importance of keeping policy relatively tight for a longer duration.
