By Alden Bentley
(Reuters) - A look at the day ahead in Asian markets.
While Chinese shares did not quite know how to react to Beijing's weekend stimulus update, Wall Street extended its breakneck rally to give Tokyo something to key off when it reopens on Tuesday from a three-day weekend.
While the Treasury market and U.S. government offices were closed on Monday for America's Columbus Day holiday, the S&P 500 and Dow roared to record high closes led by chip stocks and high hopes for the third-quarter earnings season that kicked off in earnest on Friday with beats by JP Morgan and Wells Fargo.
On Tuesday, other big money-center banks including Citi, Bank of America and Goldman Sachs report quarterly results.
Later this week, earnings from American Express (NYSE:AXP), Netflix (NASDAQ:NFLX), United Airlines and Procter & Gamble (NYSE:PG) will show any resilience in consumer spending, which dominates U.S. economic activity, before the release of retail sales data on Oct. 17, the main indicator for U.S. investors this week.
The dollar index hit its highest since mid August in holiday thinned trade, buoyed by the conviction that the Fed would choose its smaller rate cut option next month, given that the economy continues to grow and create jobs, without overheating.
The dollar may have been the only safe-haven beneficiary of China's "Joint Sword 2024B" war games around Taiwan, which the Pentagon called "destabilizing" on Monday. Gold and crude ended down.
The U.S. rate futures market has priced in an 87% chance the Fed will ease by 25 bps at the November meeting, and a 13% chance it will pause and keep the fed funds rate at the target range between 4.75% and 5%, where it has stood since last month's outsized 50-basis-points cut.
The greenback also rose against the onshore yuan after investors found China's weekend announcements that it would increase debt to revive its economy fell short on detail.
The yuan ended at its low for the day at 7.09 per dollar, also its lowest since Sept 19. It is down about 1% against the dollar since Sept. 24, when the People's Bank of China kicked off China's most aggressive stimulus measures since the pandemic.
The dollar closed in on 150 yen, ending Monday up about half a percent as the Japanese currency continued to grind lower.
MSCI's broadest index of Asia-Pacific shares outside Japan was 0.02% lower late on Monday, with trading in Asia thinned by Japan's holiday and a weaker Hang Seng Index close offset by rallies in the CSI300 blue-chip index and Shanghai Composite Index.
Numerous U.S. listed shares of Chinese firms fell on Monday, including ADRs from Alibaba (NYSE:BABA), PDD Holdings, NIO and Baidu (NASDAQ:BIDU).
The S&P 500 ended up 0.77%, the Dow up 0.47% and the Nasdaq 0.87%, with the Philadelphia Semiconductor Index up almost 2%.
Shares of Nvidia (NASDAQ:NVDA) closed at record highs, putting the heavyweight AI chipmaker on the brink of dethroning Apple (NASDAQ:AAPL) as the world's most valuable company.
All that leaves signals positive, although not uniformly so, for Tokyo's Nikkei to keep the party going, top Friday's two-week high and extend the already 27% advance since it bottomed in early August.
Here are key developments that could provide more direction to markets on Tuesday:
- Japan industrial production (Aug)
- South Korea unemployment (Sept)
- Citi, Bank of America, Goldman Sachs report Q3 earnings