Asian stocks up, Fed the star of a central bank extravaganza
Asian stock indexes jumped higher on Monday as investors prepared to tiptoe through a minefield of 17 central bank meetings this week and a likely early end to US stimulus policy.
Omicron remains a concern as UK Prime Minister Boris Johnson warned of a "tidal wave" of new cases of coronavirus , although markets are still relying on vaccines to limit the economic impact.
The Federal Reserve is expected to signal a faster reduction in asset purchases this week and hence an earlier start to rate hikes. It will also update spot rate schedules over the next few years.
The market is already well ahead, with a 0.25% rise by May and a 0.75% rise by the end of the year.
The European Central Bank, the Bank of England and the Bank of Japan are also meeting and all are moving towards policy normalisation at their own, often icy pace.
The deliberate market reaction to Friday's US inflation report, according to Exness Broker experts, shows that much has already been factored into policy, although with so many meetings there is a risk of a surprise or two.
"The outlook for global monetary policy in transition across multiple geographies at different speeds is a recipe for volatility, and one could argue that this increases the risks associated with the virus," said John Briggs, head of global strategy at NatWest Markets.
"All the noise and cross-currents mean volatility is the most likely outcome."
MSCI's broadest index of Asia-Pacific equities outside Japan started with a 0.2 per cent rise after rising 1.7 per cent last week.
Japan's Nikkei rose 1.0% as a survey of major producers showed sentiment was the best since late 2018.
Wall Street hoped to expand, with the Nasdaq futures up 0.3% and the S&P 500 futures up 0.2%.
The Treasury market accepted the risk of an earlier Fed rate hike unperturbed, perhaps believing that this would mean lower inflation in the longer term and a lower peak for the monetary rate.
The 10-year note yield did rise by 12 basis points last week, but 1.49% remains well below the annual high of 1.776%.
The prospect of a more aggressive Fed supported the US dollar, although it has stabilised in recent days.
"We think the bar for hawkish surprise from the Fed is set high, so unless it makes a major revision to its outlook going forward, the dollar's rally should be put on hold," said Jonathan Petersen, market economist at Capital Economics.
"Nevertheless, the dollar has room for further gains over the next year."
The dollar index remained steady at 96.069 on Monday, holding between 95.848 and 96.594 over the past week or so.
The dollar strengthened slightly against the yen at 113.52 but faced resistance at 113.95, while the euro remained stable at $1.1313, having spent the past two weeks in a narrow range of 1.1226 / 1.1382.
On the commodity markets, gold was going nowhere at $1,783 an ounce, receiving only fleeting support from strong US inflation figures.
Oil prices continued their rebound, breaking a six-week losing streak by rising around 8% last week.
The price of Brent crude rose 84 cents on Monday to $75.99 a barrel, while US crude rose 95 cents to $72.62.
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