Asian and European shares rose on Monday, with the MSCI Asia Pacific ex-Japan index gaining about 0.3% and the European STOXX 600 rising about 0.6%, supported by gains in technology companies and lower oil prices, as investors awaited a meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping, later this week.
Gains in Asia and Europe
The South Korean index rose about 1.1%, while Nikkei futures gained about 0.5%, with Japanese markets closed for a holiday.
In Europe, the STOXX 600 stood at 638.98 points by 07:10 GMT, after falling 0.6% last week. Germany's DAX rose 0.76% and the travel sector gained 0.86%, while the energy sector index fell 0.62% as oil prices declined.
European technology stocks rose about 2%, supported by companies linked to the chip industry.
Yen rises after Bank of Japan decision
The yen strengthened to 156.85 yen per dollar after falling about 2% last week, following the Bank of Japan's rate hike on Friday to 1.25%, its highest level in 31 years.
Investors are watching how willing the bank is to continue tightening monetary policy, amid diverging expectations about the path of US and Japanese interest rates.
Fred Neumann, HSBC's chief Asia economist, said the Bank of Japan faced “extreme difficulty in convincing markets of its hawkish bias and anchoring expectations for the yen,” adding that investors could again test the bank's ability in the coming weeks and months to raise interest rates and keep pace with the Federal Reserve's tightening.
The dollar index fell to about 100.23 points after gaining more than 1% last week. CME FedWatch data showed that markets are currently pricing in a 55% probability of a Federal Reserve rate hike in October, compared with 42.5% a week earlier.
Oil and gold prices fall
Oil prices fell amid hopes that diplomatic developments could open a path toward de-escalation in the war between the United States and Iran.
Some risk premium appears to be coming out of oil prices amid hopes that a diplomatic path toward de-escalation in the war between the United States and Iran will emerge this week
Gold also fell under pressure from higher interest rates and yields, despite continued official demand for the metal. Waterer said the focus remained on “geopolitical conditions, oil and the reaction in bond yields,” adding that for gold to gain meaningful upward momentum, a clear decline in oil prices and/or bond yields would likely be needed.
