Asian stock markets wobbled higher on Monday as hopes waned that the U.S. Federal Reserve might take a less aggressive approach on rate hikes, while wheat leapt on Russia's withdrawal from a pact allowing Ukrainian grain to transit the Black Sea.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1%, though China stocks were held flat by disappointing economic data. The index is down ten months in a row and near two-year lows, rattled by growth and interest-rate hike fears. Japan's Nikkei (.N225) rose 1.5% and is set for its best month in nearly two years.
The mixed performance follows an erratic earnings season on Wall Street and bond and currency markets tempering some wagers on a change in tone from the Fed. The dollar, after posting two weeks of losses, steadied on Monday and rose 0.5% on the yen. "Things had gotten too pessimistic," said Jun Bei Liu a portfolio manager at Tribeca Investment Partners in Sydney, of recent gains. Heavy drops in U.S. tech giants perhaps signal enough bad news is now already in the price, she said.
"The valuation crunch for a lot of those companies is already done ... we're already getting earnings downgrades, and now the market is starting to look attractive in certain sectors."
Yet Treasuries fell on Friday and slipped a little further in Asia trade on Monday, with benchmark 10-year yields up 3 basis points to 4.0392%. S&P 500 futures fell 0.2%, while European futures rose 0.4%. Chicago wheat futures leapt more than 8% to a two-week high of $8.93 a bushel in early trade, before settling back to $8.75, after Russia's withdrawal from a deal to allow Ukrainian grain shipments to reach global buyers.
"Depending on the scramble to replace planned Ukraine cargoes, prices might even head into double digits for a period," said Commonwealth Bank of Australia strategist Tobin Gorey. Palm oil futures rose nearly 5%.
Brazilian leftist leader Luiz Inacio Lula da Silva narrowly defeated President Jair Bolsonaro in a runoff election, and markets may be in for a bumpy ride on speculation around the cabinet makeup and the risk Bolsonaro questions the result.
