(Feb 3): Asian stocks were headed for gains Tuesday after solid US factory data helped lift sentiment, supporting shares and bitcoin while curbing losses in precious metals.
Equity index futures for Japan, Australia and Hong Kong all rose in early Asian trading after their underlying benchmarks fell Monday, as sharp drops in gold and silver rippled across asset classes.
Gold sank around 5% on Monday, paring a larger decline earlier in the session, while silver fell about 6%. Treasuries also retreated, while a gauge of the greenback edged 0.3% higher and bitcoin rose around 3%. The S&P 500 gained 0.5% to near its peak, while the Nasdaq 100 climbed 0.7%.
A demand-related spike in US factory activity was the catalyst for the shift in mood, offering an upbeat signal for the economy and corporate profits. Sustained growth would help provide reassurance that manufacturing is on the mend after languishing the past three years.
The Institute for Supply Management’s manufacturing index rose to 52.6 from 47.9. Readings greater than 50 indicate expansion, and the latest figure topped all projections in a Bloomberg survey of economists.
“Manufacturing activity seems to be emerging from a cold winter,” said Brian Jacobsen at Annex Wealth Management. “We’ve seen signs of life before, only for manufacturing to dip again, but with new orders growing, maybe this revival is real.”
See also: Asian stocks fall as tech sell-off gains momentum
In commodities, oil sank almost 5% Monday as geopolitical premiums faded after President Donald Trump said Washington is talking with Iran.
In Asia, data set for release includes inflation in South Korea, building approvals in Australia and retail sales for Hong Kong. The Reserve Bank of Australia is expected to raise borrowing costs by 25 basis points when it hands down an interest rate decision later Tuesday.
Elsewhere, President Donald Trump said he will slash tariffs on India to 18% after Prime Minister Narendra Modi agreed to stop buying Russian oil, easing tensions between the two countries.
See also: Asian stocks pare losses after US tech-led sell-off
The yen fell around 0.5% Monday to trade near 156 per dollar ahead of a sale of 10-year bonds.
US manufacturing
The factory data suggests the Federal Reserve (Fed) could remain on hold for an extended period as the central bank has successfully reinvigorated the manufacturing sector, according to Florian Ielpo at Lombard Odier Asset Management.
“This development is fundamentally positive for corporate earnings, benefiting both US stocks and global equities with exposure to US growth momentum,” he said. “In the near term, it reinforces the ‘Goldilocks’ narrative of solid growth with contained inflation.”
Following the manufacturing data, traders slightly reduced bets on rate cuts from the Fed, which last week paused reductions. Money markets show the next cut coming in July.
The Bureau of Labor Statistics will not release the January jobs report on Friday as scheduled due to the partial government shutdown.
Despite the bullish mood, a gauge of US tech megacaps underperformed on Monday. Walt Disney Co sank after a tepid forecast. Oracle Corp is selling US$25 billion ($31.77 billion) of investment-grade bonds to help finance infrastructure that powers artificial intelligence projects.
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Wall Street also kept a close eye on precious metals, which clawed back some losses after another heavy selloff in Asian hours, as traders took stock of the abrupt unwinding of a record-breaking rally.
“Commodity price action is more about positioning shakeout of weak or leveraged hands than a change in the fundamental story,” said Darrell Cronk at Wells Fargo. “It’s a market to watch for vulnerabilities and extremes.”
Gold and silver plummeted Friday after Trump said he’d nominate Kevin Warsh to succeed Jerome Powell as Fed chair. Markets see Warsh as more inclined than other candidates to fight against rising price pressures. That stance may translate into monetary policy aiding the dollar, eroding the so-called debasement trade that had caused gold to soar.
Uploaded by Isabelle Francis
