By Wayne Cole
SYDNEY (Reuters) -Asian shares extended recent losses on Monday, getting little lift from a surprise rate cut by China’s central bank, while Wall Street futures firmed in the wake President Joe Biden’s decision to bow out of the election race.
The People’s Bank of China cut short and long-term rates by 10 basis points, saying it was aiming to support growth and pulled bond yields down across the curve.
The move follows Beijing’s release of a policy document on Sunday outlining its ambitions for the economy.
“The rate cut is one step in the right direction. I expect more rate cuts to come after the Fed enters a rate cut cycle,” said Zhang Zhiwei, president and chief economist of Pinpoint Asset Management.
“The fact that PBOC didn’t wait for the Fed to cut first indicates that the government recognises the downward pressure on China’s economy.”
Investors seemed less than inspired by the move and MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2%, having shed 3% last week.
lost 0.9% and South Korea’s benchmark index dropped 1.0%.
Chinese blue chips were flat, though they did bounce almost 2% last week.
Investors seemed well-prepared for news President Biden would drop out of the election race and endorse Vice President Kamala Harris for the Democratic ticket.
Online betting site PredictIT showed pricing for a victory by Donald Trump had fallen 4 cents to 60 cents, while Harris climbed 12 cents to 39 cents. California governor Gavin Newsom, another possible Democratic challenger, trailed at 4 cents.
Markets took the news in their stride, with stock futures edging up 0.2%, while Nasdaq futures added 0.4%. Futures for 10-year Treasuries rose 2 ticks, while yields dipped 1 basis points to 4.23%.
“As Trump’s polling results have lifted, markets have favoured positions that anticipate more trade barriers and possibly higher inflation,” ANZ analysts said.
“Some polls have Harris performing better than Biden against Trump, and the Democrats will be hoping the next polls feature a Harris-driven bump.”
EYE ON EARNINGS
A packed week of corporate earnings will see Tesla (NASDAQ:) and Google-parent Alphabet (NASDAQ:) kick off the season for the “Magnificent Seven” megacap group of stocks.
Others reporting include General Electric (NYSE:), General Motors (NYSE:), Ford (NYSE:) and Lockheed Martin (NYSE:).
The tech sector is projected to increase year-over-year earnings by 17%, while profit for the communication services sector is seen rising about 22%.
Such gains would outpace the 11% estimated rise for the S&P 500 overall, according to LSEG IBES.
A busy week for economic news will culminate with the Federal Reserve’s favoured inflation measure out on Friday. The core personal consumption expenditures index is seen rising 0.1% in June, pulling the annual pace down a tick to 2.5%.
Markets are wagering heavily that a benign outcome will firm the case for a September rate cut, which futures are pricing as a 97% chance.
Also due are figures for advance gross domestic product that are forecast to show growth picking up to an annualised 1.9% in the second quarter, from 1.4% in the first.
The closely watched Atlanta Fed GDPNow indicator points to growth of 2.7%, suggesting some risk to the upside.
The Bank of Canada meets on Wednesday and is considered almost certain to cut its rates by a quarter point to 4.5%.
In currency markets, the dollar gave back a just a little of last week’s safe haven gains as the euro edged up 0.1% to $1.0890. The dollar was flat on the Japanese yen at 157.51.
In commodity markets, gold held at $2,408 an ounce and not far from last week’s record high of $2,483.60. [GOL/]
Oil prices inched higher, with scant sign of progress on a ceasefire deal in Gaza as Israeli forces battled Palestinian fighters in the southern city of Rafah on Sunday. [O/R]
gained 43 cents to $83.06 a barrel, while rose 55 cents to $80.68 per barrel.
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