SINGAPORE, June 6 (Reuters) – Asian shares rose on Tuesday as soft U.S. economic data reinforced expectations that the Federal Reserve may skip a rate hike when it meets next week.
MSCI̵[ads1]7;s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was 0.17% higher, clawing back earlier losses, while Tokyo’s Nikkei (.N225) rose 0.65%.
Futures indicated that European shares were set for a muted open, with Eurostoxx 50 futures down 0.05%, German DAX futures down 0.06% and FTSE futures losing 0.04%.
Australia’s S&P/ASX 200 index (.AXJO) lost 1%, while the Australian dollar rose 1% after the central bank raised interest rates by a quarter point to an 11-year high.
The Reserve Bank of Australia also warned that further tightening may be needed to ensure inflation returns to target.
“If May’s decision to leave was ‘finely balanced’, today’s rise should have been a blur given their monthly inflation gauge ripped higher and around a quarter of Australia’s workforce is about to get a big pay rise,” Matt Simpson said. senior market analyst at City Index.
The RBA’s move sets the stage for a series of monetary policy decisions by major central banks around the world, with the Fed, the European Central Bank and the Bank of Japan due to hold their policy meetings next week.
A flurry of economic data along with last week’s dovish rhetoric from Fed officials have fueled bets that the Fed will hold off on a rate hike at its 13-14 meeting. June.
Markets are now pricing in an 82% chance of the Fed standing still, a sharp jump from a 36% chance a week earlier, according to the CME FedWatch tool.
Overnight data showed the US services sector barely grew in May as new orders slowed, pushing a measure of prices paid by businesses for inputs to a three-year low, which could help the Fed’s fight against inflation.
The service industry accounts for more than two-thirds of the US economy.
“The index sends another signal that demand is cooling and the cumulative tightening is working through the economy, leaving room for the Fed to pause in June to further assess conditions,” Saxo Markets strategists said in a note to clients.
Data on Friday showed US payrolls added 339,000 jobs in May, but a rise in the unemployment rate to a seven-month high of 3.7% suggested an easing in labor market conditions.
“The tactical risk for equity investors in the near term is that the Fed actually skips a meeting and raises rates in July and not June,” said Gary Dugan, CIO of Dalma Capital.
“The life of growth, the debt ceiling as an issue now out of the way, and a slow-moving Fed can only spark a further rally in stocks.”
In China, growing expectations of policy easing to help the sluggish economic recovery as well as “sincere” talks between senior US and Chinese officials helped lift sentiment. Hong Kong’s benchmark Hang Seng (.HSI) was 0.68% higher, while the Shanghai Composite Index (.SSEC) was 0.09% lower.
In oil markets, prices eased to give up most of the gains from the previous session after the world’s biggest exporter, Saudi Arabia, said it would cut production further. US crude fell 0.26% to $71.96 a barrel and Brent was at $76.58, down 0.17% on the day.
The Saxo strategists said recession concerns, stronger signs of Fed rate cuts or China stimulus measures may be needed to turn sentiment in energy markets.
“However, there is still risk of a tighter market in the second half of the year with OPEC focused on ensuring market stability.”
In the foreign exchange market, the dollar index, which measures the dollar against six major companies, fell 0.144%, with the euro up 0.12% to $1.0725.
The yen weakened 0.10% to 139.44 per dollar, while sterling was last at $1.2448, up 0.09% on the day.
In cryptocurrencies, bitcoin was last at $25,780, having fallen more than 5% overnight after the US securities regulator sued crypto exchange Binance, in another blow to the industry.
Reporting by Ankur Banerjee; Editing by Shri Navaratnam and Sam Holmes
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