In This Article:
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Asian stock markets : https://tmsnrt.rs/2zpUAr4
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Nikkei flat, S&P futures fraction lower
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Fed minutes, European PMIs, Nvidia results feature this week
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Markets pricing in early, aggressive rate cuts globally
By Wayne Cole
SYDNEY, Nov 20 (Reuters) - Asian shares got off to a slow start on Monday in what will be a holiday-shortened week and with market valuations looking a little stretched given they have already priced in aggressive global policy easing for next year.
The Black Friday sales will test the pulse of the consumer-driven U.S. economy this week, while the Thanksgiving holiday will make for thin markets.
There were media reports Israel, the United States and Hamas had reached a tentative agreement to free dozens of hostages in Gaza in exchange for a five-day pause in fighting, but no confirmation as yet.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1%, having climbed 2.8% last week to a two-month high.
Japan's Nikkei was little changed, and is up almost 9% for the month so far amid upbeat corporate earnings.
S&P 500 futures eased 0.1% and Nasdaq futures lost 0.2%. The S&P is now up nearly 18% for the year and less than 2% away from its July peak.
Yet analysts at Goldman Sachs note the "Magnificent 7" mega cap stocks have returned 73% for the year so far, compared with just 6% for the remaining 493 firms.
"We expect the mega-cap tech stocks will continue to outperform given their superior expected sales growth, margins, re-investment ratios, and balance sheet strength," they wrote in a note. "But the risk/reward profile is not especially compelling given elevated expectations."
Tech major Nvidia reports quarterly results on Tuesday, and all eyes will be on the state of demand for its AI related products.
The flow of U.S. economic data turns to a trickle this week, but minutes of the Federal Reserve's last meeting will offer some colour on policy makers' thinking as they held rates steady for a second time.
A LOT PRICED IN
Markets have all but priced out the risk of a further hike in December or next year, and imply a 30% chance of an easing starting in March. Futures also imply around 100 basis points of cuts for 2024, up from 77 basis points before the benign October inflation report shook markets.
That outlook helped bonds rally, with 10-year Treasury yields down at 4.43% having dropped 19 basis points last week and away from October's 5.02% high.
It also dragged the U.S. dollar down almost 2% on a basket of currencies and helped the euro up to $1.0907 having jumped 2.1% last week.