Nikkei leads world higher in event-packed week ahead

[March 04, 2024]  By Nell Mackenzie and Wayne Cole

LONDON/SYDNEY (Reuters) -World shares tipped higher Monday as a mixed European open could not dispel enthusiasm over record heights reached by Japan's Nikkei and as investors braced for a week packed with central bank events and major data that could refine market wagers.

Federal Reserve Chair Jerome Powell testifies before lawmakers on Wednesday and Thursday, though analysts assume he will stay in wait-and-see mode on policy given recent upside surprises on inflation that have helped temper market rate cut bets.

The February payrolls report on Friday could also shift the calculus with forecasts favouring a still-solid rise of 200,000 after January's barnstorming 353,000 jump.

"We are still in an environment of economic improvement. Friday's U.S. employment data will tell us a lot about where we are in terms of wage inflation and consumer resilience," said Lilian Chovin, head of asset allocation at the British private bank, Coutts.

"It will also inform on whether the current narrative is sustainable."

In Europe, a UK budget on Wednesday is followed by the European Central Bank's latest policy meeting on Thursday. The ECB is considered certain to keep rates at 4.0%, but also lower its outlook for inflation in a nod to eventual cuts.

Europe's broadest index of stocks and the German DAX steadied while the French and UK markets slipped 0.2% and 0.3%, respectively by 0905 GMT.

Other events of note this week include U.S. President Joe Biden's State of the Union address on Thursday, the Super Tuesday U.S. primaries and China's National People's Congress (NPC) meeting starting on Tuesday which might flag new stimulus measures.

Chinese blue chips were largely flat awaiting some concrete news on any measures.

The Bank of Canada also meets this week and the expectation is they stay on hold, with a first cut seen in June or later.

NIKKEI HEADS NORTH

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7%, after snapping a five-week winning streak with a slight drop last week.

Japan's Nikkei climbed 0.5% to break 40,000 for the first time, having risen for five weeks straight. Tech darling Tokyo Electron has surged over 50% since the start of the year.

A man passes by an electronic screen displaying Japan's Nikkei share average as it scaled an all-time closing high in Tokyo, Japan February 26, 2024. REUTERS/Issei Kato/File Photo

An upbeat report on fourth quarter capex out Monday suggested GDP could be revised to positive from negative, meaning Japan was not in recession after all. That added to speculation a strong wage round could lead the Bank of Japan to end negative rates in April.

S&P 500 futures and Nasdaq futures were trading near flat, having made record closing highs on Friday on upbeat earnings and enthusiasm for all things AI. [.N]

BofA analyst Savita Subramanian now sees the S&P 500 pushing on to 5,400, thanks to solid earnings, though there is a risk of a correction given how far the market has come.

"The era of lower quality growth where cheap capital and globalization contributed to margins is over," says Subramanian. "Now it's time for sustainable efficiency and productivity gains supported by automation and AI."

In currency markets, the dollar steadied after some soft U.S. economic data, while the yen firmed ahead of Tokyo consumer price data on Tuesday that is expected to show inflation sprang higher in February.

The dollar stood at 150.40 yen, creeping towards last week's peak of 150.85. The euro lay flat at $1.0845 after bouncing from a low of $1.0796 last week.

Bitcoin meanwhile scaled a two-year high, breaking $64,000 as a wave of money carried it within striking distance of record levels.

The U.S. data surprise had helped gold to a two-month top and the metal was last trading steady at $2,083 an ounce. [GOL/]

Oil prices firmed after OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter. [O/R]

Brent rose 42 cents to $83.97 a barrel, while U.S. crude gained 34 cents to $80.31 per barrel. [O/R]

(Reporting by Nell Mackenzie and Wayne Cole;Editing by Shri Navaratnam, Christian Schmollinger and Susan Fenton)

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