Asian shares firmed on Monday (3 July) as demand for tech stocks buoyed Japan's market, while a data-packed week promises to be pivotal to the outlook for the Chinese economy and US interest rates.
China's factory activity slowed in June as the Caixin manufacturing survey showed a dip to 50.5, from 50.9 in May. That slightly beat market forecasts of 50.2, but still underlined the weakening trend seen in other surveys.
China's central bank has promised more "forceful" action to support the economy and looks likely to soon get a new boss. Something major is needed given Chinese blue chips .CSI300 shed 5% last quarter while much of the developed world rallied.
"As Japan found in the 1990s, it's hard work stimulating an economy experiencing a significant property slump against a backdrop of high sector debt and a falling population," cautioned analysts at ANZ in a note.
In contrast, hopes Japanese firms will fill any gaps created by Sino-US decoupling combined with a weak yen to lift the Nikkei .N225 almost 20% last quarter. The index was up another 1.5% on Monday and within a hair's breadth of recent peaks.
A survey from the Bank of Japan showed business sentiment improved in the second quarter as easing supply constraints and the removal of pandemic curbs lifted factory output and demand.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.8%, though it has been lagging far behind Japan's market.
EUROSTOXX 50 futures STXEc1 and FTSE futures FFIc1 both added 0.3%. S&P 500 futures ESc1 and Nasdaq futures NQc1 were steady ahead of the July 4 holiday, having gained more than 6% in June.
The high-flying tech sector could get another boost from news TeslaTSLA.O delivered a record 466,000 vehicles in the second quarter, topping market estimates of around 445,000.
That followed Apple's AAPL.O crossing above $3 trillion in valuation for the first time on Friday and sealing the Nasdaq's best quarter in 40 years.
Analysts at BofA noted the market value of the seven biggest tech stocks had ballooned by $4.1 trillion so far this year, while Apple, Microsoft MSFT.O and Alphabet GOOGL.O combined were worth more than the entire emerging market.
FED STILL SEEN HIKING
Sentiment had been soothed on Friday by a modest downward surprise in US inflation while a flat reading for consumer spending suggested the Federal Reserve's rate hikes were having an impact, albeit gradually.
Debt markets, however, still imply around an 84% chance of the Fed hiking to 5.25-5.5% this month and a 60% probability of yet a further rise by November.
Minutes of the Fed's last policy meeting are out on Wednesday and will expand on why they decided to pause, though most policymakers also expected to hike at least two more times by year-end.
Important US data this week includes closely watched surveys on manufacturing and services, job openings and the June payroll report. Median forecasts are for a steady unemployment rate, while jobs are seen up 225,000 after May's surprisingly strong 339,000.
"We don't think that would be nearly enough slowing for Chair Powell and the rest of the FOMC to stand down from the recent rhetoric pointing to further tightening," said Michael Feroli, an economist at JPMorgan.
"While we see a strong case for a July hike, we still believe the two subsequent payroll reports prior to the meeting in September will show enough slowing to allow the Fed to more comfortably go on extended hold."
The prospect of at least one more US rate rise continues to underpin the dollar against the yen, given the Bank of Japan shows little sign of abandoning its super-easy policies.
The dollar stood at 144.51 yen JPY=EBS on Monday, after hitting an eight-month peak of 145.07 last week before the risk of Japanese intervention slowed its ascent.
The euro was likewise firm at 157.61 yen EURJPY=R, and just off its recent 15-year top of 158.01. The single currency was range-bound on the dollar at $1.0905 EUR=EBS, having spent the entire year so far trading between $1.0635 and $1.1096.
Rising interest rates globally have seen gold struggle recently and the metal was last lying at $1,917 an ounce XAU=, near last weeks' three-month low at $1,892. GOL/
Oil prices marked time as investors waited to see the impact of another round of output cuts by Saudi Arabia. O/R
Brent LCOc1 rose 6 cents to $75.47 a barrel, while US crude CLc1 firmed 2 cents to $70.66.