Amidst anticipation of a global manufacturing resurgence, industrial metals prices continued to rise on Tuesday. Meanwhile, Asian equities increased slightly more cautiously prior to this week's US inflation data and an important meeting of the European Central Bank.
The broadest index of Asia-Pacific stocks outside Japan by MSCI increased by 0.2%. Nikkei in Japan increased by 0.6%.
Shanghai copper futures moved up 1%, reaching a two-year peak, and have risen over 10% in only one month. Aluminum in Shanghai reached a 22-month high on Monday, and zinc reached a five-month peak.
Iron ore prices in Singapore even managed to hold over $100 per tonne despite being pummeled by the property downturn in China.
According to Vishnu Varathan, the head of economics from Mizuho Bank in Singapore, it's essentially a China bet. It has correlated nicely with the worldwide manufacturing bottoming, which is good news for China's industrial revival, in his opinion. That part of it is a broader story for metals.
Data released on Monday indicated that German industrial production increased in February more than anticipated.
According to figures last week, the United States' manufacturing sector expanded for the first time in a year and a half. In March, China's manufacturing activity grew for the first time in six months.
Precious metal prices have also surged, with gold currently trading just below its record high of $2,353 set on Monday. This year, spot gold has increased by almost 14%.
Platinum has also increased, and silver reached its highest level since mid-2021 on Monday. Brent crude is still above $90 per barrel at $90.62, although it is not as high as its recent peaks.
Although Hang Seng in Hong Kong opened 1.2% higher and China proxies like the Antipodean currencies were rising, Chinese stocks haven't joined the celebration.
Tuesday's trading price of $0.6605 for the Australian dollar puts it up over 2% in just one week. The New Zealand dollar has stabilized over $0.60 and reached a two-week peak of $0.6047 during morning trading.
The value of the Chinese yuan has stabilized at a rate of roughly 7.3 to the US dollar, after declining by 1.8% so far this year.
This week's key events for the world's bonds, stock markets, and currencies are the US inflation data that is scheduled for release on Wednesday and the ECB meeting on Thursday.
Predictions for US rate reductions have been dwindling. The market had anticipated a rate reduction of over 150 basis points in January, but now investors are even unsure of half that amount.
Annualized headline inflation in the US is seen increasing from 3.2% one month earlier to 3.4% in March. US two-year yields, which reflect short-term interest rate anticipations, are at 4.801%, the highest level since late November, while on Monday, ten-year yields reached 2024 highs of 4.46%.
However, it is difficult for the dollar to keep up with the rate increases since the euro is holding steady in case the ECB surprises markets with a hawkish stand and commodity currencies are rising.
The euro is trading at $1.0860.
While holding interest rates, the ECB is expected to signal a drop that the markets are pricing in for June.
According to ING strategists, a near-term stabilization of the EUR/USD exchange rate around $1.0800 is still likely, though declines to $1.07 or below seem more likely than an advance higher to $1.09/1.10.
Meanwhile, the yen is still under a lot of pressure from investors who believe that any delays in rate cuts elsewhere will leave Japan's near-zero rate of interest in a wide open gap.
At 151.87 against the dollar, the yen is just slightly higher than its 34-year low of 151.975 set last month. It is down at 164.96 against the euro, its lowest level in three weeks.
The Finance Minister of Japan, Shunichi Suzuki, reiterated his warning that Tokyo is prepared to take action against the currency's latest sharp losses and stated that authorities will not rule out any alternatives to dealing with excessive yen swings.
A strategist from Standard Chartered, Steve Englander, wrote a note to investors stating that they expected Japan to step in above 152 but not right away on a break.