Asia shares higher edge, oil continues to climb

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A man wearing a mask walks in the Shanghai Stock Exchange building in the Pudong financial district in Shanghai, China, as the country is hit by an outbreak of a new coronavirus, February 3, 2020. REUTERS/Aly Song

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  • Asian scholarships:
  • Nikkei rebounds from 14-month low, S&P 500 futures flat
  • Focus on UK and EU central bank meetings, US jobs
  • The dollar maintains its gains, oil climbs again

SYDNEY, Jan 31 (Reuters) – Asian stock markets made cautious gains on Monday ahead of a week that is expected to see higher interest rates in the UK and mixed reports on jobs and manufacturing in the United States , while soaring oil prices add to inflation concerns.

Data released on Sunday showed Chinese factory activity slowed in January as a resurgence in COVID-19 cases and severe lockdowns hit output and demand. Read more

The standoff over Ukraine remains a thorn in the side of the market, which fears a Russian invasion could also cut off vital gas supplies to Western Europe. Read more

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The Lunar New Year holiday created tough conditions and MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 0.3% in slow trading.

The Japanese Nikkei (.N225) rebounded 1% from a 14-month low, although local industrial production and retail sales data were weaker than expected.

S&P 500 and Nasdaq futures were flat, while EUROSTOXX 50 futures were up 1% and FTSE futures were up 0.6%.

The Bank of England is expected to raise rates again this week, continuing the global trend towards tighter policy. The European Central Bank is also meeting, but is expected to stick to its argument that inflation will come down over time. Read more

Markets have swung to price in five Federal Reserve hikes this year to 1.25%, though investors still see rates peaking at an all-time low of 1.75-2.0%.

BofA analysts think that’s not hawkish enough.

“We emphasize that markets underestimated Fed hikes at the start of the last two hike cycles and we believe this will be the case again,” said BofA chief economist Ethan Harris.

“Starting in March, we expect the Fed to begin raising rates by 25 basis points at each remaining meeting this year for a total of seven hikes, with four more hikes next year,” it added. -he. “This would bring the terminal rate to 2.75-3.00% by the end of 2023, which should slow growth and inflation.”

The Fed Journal is rather sparse this week with just three regional presidents scheduled to speak, but there’s plenty of data highlighted by the ISM readings on manufacturing and services, and the report on the economy. January job.

The payroll number is expected to be low given the upsurge in coronavirus cases and inclement weather. The median forecast is for a rise of just 155,000, while forecasts range from a gain of 385,000 to a decline of 250,000.

“We expect nonfarm payrolls to rise by just 50,000 in January and the unemployment rate to hold steady at 3.9%,” Barclays analysts said in a note.

“We see downside risk to our forecast given the 8.8 million adults who were either not working the week of January 11 to care for someone who was sick, or who were sick themselves.”

The Fed’s hawkish turn has seen yields on 10-year US Treasuries climb 27 basis points this month to 1.78%, making bonds relatively more attractive relative to equities and especially US stocks. growth with stretched valuations.

It also supported the US dollar, which has jumped 1.7% so far this month against a basket of its major rivals at its highest since July 2020 and now sits at 97.167.

The euro lost 1.7% last week, falling to its weakest level since June 2020, and last traded at $1.1157. The dollar even gained on the safe haven yen, up 1.3% last week to settle at 115.53 yen.

Rising yields have been a dead weight for gold, which is not yielding anything, and the metal has remained stuck at $1,789 an ounce, after losing 2.4% in the past week.

Oil prices hit near seven-year highs after climbing for six straight weeks as geopolitical tensions heightened worries about limited energy supplies.

Brent rose another $1.30 to $91.33 a barrel, while U.S. crude added $1.27 to $88.09.

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Reporting by Wayne Cole; Editing by Sam Holmes and Simon Cameron-Moore

Our standards: The Thomson Reuters Trust Principles.

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