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Asian stocks lifted by US futures, rising oil

A man walks past a screen showing a graph showing the recent average movements in the Nikkei stock outside a brokerage house in Tokyo, Japan, December 30, 2020. REUTERS / Issei Kato / File Photo

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  • Asian stock markets:
  • Nikkei adds 0.3%, S&P 500 futures rise 0.4%
  • Euro of 7-year highest yen before ECB meeting
  • US CPI report to test market thinking on Fed hikes
  • Oil companies after Saudi Arabia raise prices

SYDNEY, June 6 (Reuters) – Asian equities joined US stock futures to reach cautious gains on Monday ahead of US inflation data this week, while the euro reached a seven-year high against the yen amid efforts by the European Central Bank to tighten.

Oil prices strengthened after Saudi Arabia raised prices sharply for crude oil sales in July, an indicator of how tight supply is even after OPEC + agreed to accelerate production growth over the next two months.

MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) rose 0.1%, while Japan’s Nikkei (.N225) recovered early losses to reach 0.6%.

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S&P 500 futures increased by 0.5% and Nasdaq futures 0.6%. EUROSTOXX 50 futures rose 0.8% and FTSE futures 1.0%.

Chinese blue chips (.CSI300) climbed 1.3% after a survey confirmed that activity in the service sector shrank in May, but the Caixin index continued to improve to 41.4 from 36.2. read more

The sentiment was helped by comments from US Secretary of Commerce Gina Raimondo that President Joe Biden has asked his team to look into the possibility of raising some tariffs on China. read more

Markets will be across the US consumer price report on Friday, especially after EU inflation shocked many with a record high last week.

The forecasts are for a steep increase of 0.7% in May, although the annual rate is kept at 8.3% while core inflation is seen to decline slightly to 5.9%.

A high number will only increase expectations of aggressive tightening from the Federal Reserve with markets already priced for half-point increases in June and July, and almost 200 basis points by the end of the year.

Some analysts thought Friday’s positive earnings report suggested the Fed was heading for a soft landing.

“May’s numbers were about as good as the Fed could expect,” said Jonathan Millar, a Barclays economist.

“It is a good sign that the Fed’s plans to cool down the labor market are playing out favorably so far, with solid gains in employment continuing to generate steady income gains that will help curb recession concerns so far.”


The European Central Bank will meet on Thursday and President Christine Lagarde is considered confident of confirming an end to bond purchases this month and a first rate hike in July, although the jury is out on whether it will be 25 or 50 basis points.

The money markets are priced at 125 bps with year-end increases, and 100 bps as soon as October.

“Recent communications from ECB officials have seen 25bp increases in July and September to come out of negative interest rates by the end of Q3, but with some members preferring to leave the door open for larger 50bp increases,” said the analyst at NAB. “Lagarde’s press conference after the meeting will be followed closely.”

The outlook for positive prices this year has helped the euro move up to $ 1.0731, some distance from the recent fall of $ 1.0348, although it has struggled to remove resistance around $ 1.0786.

The euro also reached a seven-year high of the yen at 140.39, after climbing 2.9% last week, while the dollar held at 130.65 yen after rising 2.9% last week.

Against a basket of currencies, the dollar stood at 102,110 after strengthening 0.4% last week.

In commodity markets, wheat futures rose 4% after Russia hit Ukraine’s capital, Kyiv, with missiles, dampening hopes of progress in peace talks. read more

Gold was stuck at $ 1,855 per ounce, after sticking to a tight range for the past few weeks.

Oil prices received an extra boost after Saudi Arabia set higher prices for shipments to Asia, while investors are betting that supply increases planned by OPEC will not be enough to meet demand, especially as China eases barriers.

“Perhaps only a third to a half of what OPEC + has promised will come online in the next two months,” said Vivek Dhar, a mining and energy analyst at the CBA.

“Although this increase is urgently needed, it falls below expectations for growth in demand, especially with the EU’s partial ban on Russian oil imports also taken into account. We see upside risks to our Brent oil price forecast of $ 110 per barrel.”

In fact, Brent is already well past adding 74 cents on Monday to reach $ 120.46 a barrel. U.S. crude rose another 75 cents to $ 119.62 a barrel.

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Edited by Sam Holmes and Jacqueline Wong

Our standards: Thomson Reuters Trust Principles.

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