SYDNEY: Most Asian share markets rose on Monday on optimism the Federal Reserve would pause its rate hikes this month after a mixed US jobs report, while oil prices jumped after Saudi Arabia pledged big output cuts.
The optimism is set to run into some resistance in Europe, with pan-regional Euro Stoxx 50 futures down 0.2%. S&P 500 futures dipped 0.1% and Nasdaq futures dropped 0.4%.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan was flat for the day, as losses in Chinese shares offset gains elsewhere.
Japan's Nikkei surged 2.1% to stand above 32,000 for the first time since July 1990.
Hong Kong's Hang Seng index rose 0.4% while China's blue-chip index fell 0.7%.
Morgan Stanley on Sunday lowered their index targets for offshore-centric Chinese indices, citing a delayed earnings recovery, a weaker currency outlook and geopolitical uncertainties.
However, Laura Wang, the MS equity strategist, believes China's recent weaker macro data demonstrates an uneven and unbalanced recovery, not the end of its up-cycle.
"We also expect policy makers to step up easing measures around late June/early July and a consumption-led recovery to broaden out in the second half of the year as the job market and income levels recover," said Wang.
On Monday, oil prices, which have recently come under pressure amid heightened concerns about China's slowing economy, rose after Saudi Arabia announced it would cut its output to 9 million barrels per day in July, from around 10 million bpd in May, the biggest reduction in years.
Brent oil rose 1.2% to $77.07 a barrel by 0600 GMT, giving up some of its earlier gains to as high as $78.73, while US crude climbed 1.3% to $72.69 a barrel, after hitting a session high of $75.06.
"With Saudi Arabia protecting oil prices from sliding too low ... we think oil markets are now more prone to a shortfall later this year," said Vivek Dhar, a mining and energy commodities strategist at Commonwealth Bank of Australia.
"We think Brent futures will rise to $US85/bbl by Q4 2023 even with a tepid demand recovery in China factored in."
Data on Friday showed the US economy added 339,000 jobs last month, higher than most estimates, but moderating wage growth and rising jobless rate led markets to continue to bet on no change in Fed rates this month, with a 75% chance priced in for that, according to CME FedWatch tool.
However, there is about a 70% probability that Fed funds rates would reach 5.25-5.5% or beyond at the policy meeting in July, if US inflation remains elevated. Conversely, markets now see little chance of a rate cut by the end of this year.
Treasury yields continued to climb on Monday. Yields on US two-year Treasuries rose 3 basis points to 4.5410%, on top of a surge of 16.2 bp on Friday, and 10-year yields also climbed 3 bps to 3.7216%, after a rise of 8 bps on Friday.
Fitch Ratings said the United States' "AAA" credit rating would remain on negative watch, despite the debt agreement.
The US dollar was at 104.11 against its major peers on Monday, after gaining 0.5% on Friday on the jobs report. The greenback also rose 0.1% on the Japanese yen to 140.03 while the euro eased 0.1% to $0.1070.
Central banks from Australia and Canada will meet this week. Markets see a sizeable chance - about 40% - that the RBA could surprise with a quarter-point hike on Tuesday, after a minimum wage hike that some economists feared could further stoke inflationary pressures.
The Bank of Canada will meet on Wednesday. A majority of economists polled by Reuters expect the BOC to keep interest rates on hold at 4.5% for the rest of the year although the risk of one more rate rise remains high.