Asian markets are poised for continued gains as investor appetite for stocks and risk assets remains strong. With no major economic data or events scheduled in Asia on Tuesday, the uptrend across the continent is likely to persist when markets open.
Global market dynamics on Monday illustrated the “fear of missing out” driving the current risk-on rally. Stocks rose despite rising volatility, the dollar, bond yields and geopolitical uncertainty. This sentiment is often seen as a warning sign, especially when long-time market skeptics join in the buying frenzy.
One notable skeptic, Morgan Stanley’s U.S. equity strategist, and his team have revised their 12-month base case forecast for the S&P 500 to 5,400, a modest increase from Friday’s close but a significant 20% increase from their previous forecast of 4,500. Investors are holding their bullish stance, at least until earnings from chipmaker Nvidia (NASDAQ: NVDA) on Wednesday.
Asia is also taking advantage of the positive market sentiment. Japan's MSCI Asia Pacific Index hit a two-year high with a seventh straight day of gains, marking its best performance since January. Another gain on Tuesday would confirm its best winning streak since August-September 2021.
Japan's Nikkei index broke above 39,000 for the first time in more than a month, and the dollar rose above 156.00 yen, approaching the level that triggered the Japanese government's yen-buying intervention on May 1. While currency intervention seems unlikely at the moment, currency traders remain cautious. Speculators trimmed their net short positions in the yen for the third straight week, according to the latest data from the Commodity Futures Trading Commission.
The main highlight for the Asia-Pacific region on Tuesday was the release of the minutes from the Reserve Bank of Australia’s May 7 policy meeting. The RBA ruled out an imminent rate hike at that meeting and also indicated that a rate cut was not expected in the near future. The Australian dollar has since rallied, hitting a four-month high just above $0.67. Australian interest rate markets are not expecting a 25 basis point rate cut until April next year.
Other key developments that could influence market direction on Tuesday include Australian consumer sentiment data for May and the presentation of Indonesia's economic forecast for 2025 to parliament.
Source: Investing
