Huitong Finance APP News - On Monday (July 29), Asian stocks followed Wall Street's rise, entering a week of major central bank decisions and the release of earnings reports from large technology companies.

Shares in Australia, Japan and South Korea rose. Optimism was high, led by a rise in U.S. stocks on Friday, as the market bet that an upcoming interest rate cut will help boost corporate earnings. U.S. stock futures also rose on Monday. #亚市直击#

Decisions of the three major central banks

Monetary policy decisions in Japan, the United States and Britain are in focus this week after the yen surged last week on global markets betting the Bank of Japan could raise interest rates. Earnings from a slew of companies including Apple Inc, Amazon.com Inc and Microsoft Corp will also be scrutinized for clues about the health of the world’s largest economies.

“Watch for policy decisions from the three major central banks, especially the Federal Open Market Committee (FOMC), which is likely to remain unchanged but hint at an upcoming rate cut,” OCBC analysts wrote. The Bank of Japan is expected to announce quantitative tightening, while the Bank of England is “on track to cut rates for the first time since 2020.”

The Federal Reserve is expected to signal at the end of its meeting on Wednesday that it plans to cut interest rates in September, according to economists surveyed by Bloomberg News, a move they said would begin a process of quarterly rate cuts through 2025. Money markets are fully pricing in a September rate cut and the possibility of two more cuts before the end of the year, according to swaps data compiled by Bloomberg.

“While the July FOMC meeting may not be the time to initiate a rate cut, it is not too early to start preparing for a September rate cut,” Stephen Gallagher, an economist at Societe Generale, wrote in a note to clients.

The Bank of Japan is in a difficult position

The Fed decision comes just hours before the Bank of Japan is expected to release details of a cut in its monthly bond-buying program at the end of a two-day policy meeting on Wednesday, while most economists also see risks of a rate hike.

The yen erased earlier losses against the dollar and rose against all Group of 10 currencies, boosted by bets that Japan could raise interest rates. The U.S. 10-year Treasury yield fell two basis points to 4.17%.

The yen rose 2.4% against the dollar last week as traders priced in more than a two-thirds chance of a 10 basis point rate hike, leading to a sell-off in risk-sensitive developed and emerging market currencies and helping push the Nikkei 225 into a technical correction.

“Derivatives markets are pricing in a warning that the consequences of the Bank of Japan not raising rates could be more damaging than the rate hikes themselves,” Marc Chandler, chief market strategist at Bannockburn Global Forex, wrote in a note to clients. “A failure to raise rates would likely trigger a sell-off in the yen.”

Elsewhere in Asia, Chinese factory activity data will be released this week, providing more insights into the People's Bank of China's surprise interest rate cut to boost the flagging economy. Australia's inflation data will also be closely watched as investors and analysts debate whether the country's central bank will raise interest rates early next week.

In commodities, oil prices stabilized near six-week lows ahead of a key OPEC+ meeting this week, with analysts divided over whether the group will proceed with plans to increase production next quarter. While the alliance is trying to restore supply it has withheld from the market for two years to support prices, slowing economic growth in top consumer China and new oil supplies across the Americas threaten the plan.

Middle East tensions also showed no signs of easing, with Turkish President Recep Tayyip Erdogan suggesting his country might support the Palestinians militarily. Israel attacked Hezbollah on Sunday and threatened further retaliation for rocket attacks, but said it was willing to accept a proposed Gaza ceasefire that could also ease a second, more tense front with Lebanon.

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