Wayne Cole

SYDNEY, (Reuters) – Asian shares climbed alongside Wall Street on Monday. The dollar was pinned at five week lows on Monday as investors bet on a slowdown in U.S. monetary tightening despite sharp increases in June and July.

Shanghai officials announced Wednesday that many conditions will be lifted for companies to resume work beginning on Wednesday. They are trying to ease the pressure that has been building since the two-month-old city lockdown.

This could result in a weak session before the end of May due to Memorial Day Holiday in the United States. MSCI’s largest index of Asia-Pacific shares, MSCI Asia-Pacific Shares outside Japan edged up 0.3% for a three-week peak.

South Korea climbed 0.9% and Nasdaq rose 1.3%. After gaining 6.8% last Wednesday, Nasdaq futures gained 0.4%. They also firmed 0.3% after rallying 6.6% in the last week.

The Federal Reserve has been gaining attention from investors by hinting that it might slow down its tightening once it has increased aggressively in the past two months.

“Hopes, naïve or otherwise, for a pause in the Fed tightening cycle as early as September continue to resonate,” said Ray Attrill, head of FX strategy at NAB. “Money markets are now pricing additional Fed rate increases at 180bps, down from 193bps in the beginning of 2022.”

This however still suggests rate increases at all Fed meetings of 2022. These include 50bps rises in June and July, and at least 25bps for each of the three remaining Fed meetings.  

Treasuries rose just because of the potential for a Fed that was less hawkish, and 10-year note yields hovered at 2.74 percent after six weeks. It is down from May 9, when it was at 3.203%.

A steady market mood has led to the safe-haven yen and dollar declining, while euro gains were aided by hawkish remarks from European Central Bank officials (ECB), who had been calling for a rate increase as soon as July.

Zach Pandl (Goldman Sachs, NYSE:) an analyst, stated that the U.S. economy data appears to be slowing. ECB officers are discussing faster initial rate rises and front-end differentials have begun to shift in favour of the euro.

Pandl said that a sharp slowing of the U.S. economic growth – even if it is not met by similar weakness elsewhere in Europe – could lead to a significant euro rebound. However, the opposite can also happen if U.S. statistics hold up better than anticipated. We see upside risks for U.S. economic growth and recommend put options in order to convey this opinion.

This underscores how important this week’s U.S. data is, which includes ISM manufacturing survey on Wednesday and May payrolls report Friday.

The payrolls will rise by a substantial 320,000. However, this would still be a significant increase over April’s level. Unemployment is at 3.5%.

Monday’s euro held at $1.0732 after having gained 1.6% in the past week and climbed as high as $1.0764. Following a 1.3% drop last week and hitting a 52-week low of 101.43, it stood at 101.68.

After finding support at around 126.37 over the past week, the dollar held steady against the yen at USD127.25.

This pullback in dollar prices helped gold to rebound from its previous lows. Gold was now trading at $1.850 an ounce. [GOL/]

Expectations for higher demand and a U.S.-led driving season have supported oil prices, as well as European countries negotiating over whether or not to ban Russian crude oil.

On Sunday, the EU failed to reach agreement on an oil embargo for Russia. However diplomats are still working to achieve progress before a summit on Monday and Tuesday.

The price of a barrel rose by 54 cents, to $115.61.