Asian shares edged higher on Monday but gains were capped by concerns that market volatility may intensify as the U.S. central bank prepares to raise interest rates for the first time in six years.
U.S. Federal Reserve Chair Janet Yellen indicated on Friday that it was poised to raise rates this year if the economy keeps improving as expected, though a raft of recent data has suggested it is growing only modestly in the second quarer.
Market activity was thin, with the UK, U.S. and many European markets shut for holidays on Monday. Futures FCEc1 for the CAC 40 .FCHI index indicated a steady open for France’s equity index.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.3 percent, off earlier lows as shares in China rallied after Beijing said it is seeking private funding for over $300 billion worth of public projects.
The National Development & Reform Commission on Monday unveiled the list of 1,043 public-private partnership (PPP) projects on its website, in the latest effort by the government to reinvigorate China’s flagging economy.
“These projects would be a boon to the infrastructure sector, which also benefits from China’s ‘One Belt, One Road’ initiative,” Zhang Chen, analyst at Shanghai-based hedge fund manager Hongyi Investment said, referring to Beijing’s ambitious overseas investment plan around Asia.
Japan’s Nikkei stock index .N225 added 0.7 percent to end at a 15-year high, up for its seventh straight session as it got a tailwind from a weaker yen and better-than-expected April exports.
U.S. shares fell and Treasury yields and the dollar rose on Friday, after the U.S. Labor Department’s gauge on core consumer goods prices rose by 0.3 percent last month, bringing the year-on-year rise to 1.8 percent, the highest since October.
“The flow is shifting back in favour of the dollar, hurt recently by spotty economic data and receding likelihood of an early rate hike. Comments by policymakers has also helped,” said Koji Fukaya, president of FPG Securities in Tokyo.
“A June hike had gone out the window with sentiment for tightening in September and even later receding at one point, but such pessimism has ebbed,” he said.
In a speech to a business group, Yellen said she expected economic data to strengthen and noted that some of the U.S. economy’s weakness at the start of the year might be due to “statistical noise.”
In foreign exchange markets, Greece’s financial woes kept pressure on the euro.
Athens cannot make debt repayments to the International Monetary Fund next month unless it manages to reach a deal with its lenders, its interior minister said on Sunday, in the most explicit remarks so far about the likelihood of default if talks fail.
The euro, which was down about 0.2 percent at $1.0997 EUR=, wallowing at its lowest levels since late April.
The dollar was slightly higher against its Japanese counterpart at 121.57 yen JPY=, after pushing to its highest levels since mid-March.
Oil futures steadied after skidding ahead of the long U.S. holiday weekend, giving up about 2 percent on Friday as a rallying dollar and profit-taking took their toll.
U.S. crude CLc1 added about 0.1 percent to $59.79 a barrel after eking out a small weekly rise to extend its weekly gains for a 10th straight week.
Brent LCOc1 was down about 0.1 percent at $65.33 after dropping 2.1 percent for the week.
Source: Reuters
