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Asian Stocks Up Over Growing Expectations of Lower Interest Rates

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By Gina Lee

Investing.com – Asia Pacific stocks were up Monday morning over mounting expectations that interest rates will remain low, thanks to inflationary pressure. Meanwhile, a cyber-attack on a U.S. pipeline operator caused oil and gas prices to jump.

Japan’s Nikkei 225 gained 0.80% by 10:49 PM ET (2:49 AM GMT) and South Korea’s KOSPI jumped 1.37%.

In Australia, the ASX 200 rose 1.02%. Data released earlier in the day said that the National Australia Bank (NAB) Business Confidence Index rose to a better-than-expected 26 in April, but retail sales grew 1.3% month-on-month in March, slightly below expectations. Meanwhile, a lockdown in Sydney to curb the latest COVID-19 outbreak was extended until May 17.

Hong Kong’s Hang Seng Index was up 0.59%.

China’s Shanghai Composite was up 0.25% and the Shenzhen Component edged up 0.11% ahead of Chinese inflation data due on Tuesday.

Treasury yields edged up to about 1.60% ahead of a busy week of auctions.

Colonial Pipeline was forced to shut down on Friday following a ransomware attack, and still does not have a timetable for a re-start. Investors now look to the Organization of the Petroleum Exporting Countries (OPEC)’s monthly Oil Market Report, which will be published on Tuesday.

Investors are also awaiting U.S. inflation data, including the Core Consumer Price Index, due later in the week. Investors are also looking to speeches by a slew of U.S. Federal Reserve officials during the week for clues about the central bank’s next step.

Chicago Fed President Charles Evans who will speak on the economic outlook later in the day and U.S. Fed Governor Lael Brainard on Tuesday.

“At the moment the view is very much that inflation is transitory... the Fed having experimented for the last ten years is trying to keep on running it hot, but at the end of the day the disinflationary forces are still very strong in the economy,” Citigroup (NYSE:C) Global Markets head of Asia trading strategy Mo Apabhai told Bloomberg.

Across the Atlantic, Bank of England Governor Andrew Bailey is due to speak on Wednesday.

On the data front, Friday’s U.S. employment report for April also disappointed, with non-farm payrolls only rising by 266,000 during the month, well below the 978,000-rise in forecasts prepared by Investing.com. April’s unemployment rate was also a higher-than-expected 6.1%.

The data suggests that the Fed will continue to stick to its dovish stance, with U.S. Treasury Secretary Janet Yellen saying that the report “underscores the long-haul climb back to recovery.” However, Yellen reiterated that she expects a return to full employment in 2022.

"It certainly pushes back the timetable for Fed tapering, perhaps to December from the prior expectations of the Jackson Hole Symposium in late August... a softer payrolls is good for the reflation trade," Pepperstone head of research Chris Weston said in a note.

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