SYDNEY- Asian shares bounced on Monday into a week packed with earnings and a trio of central bank meetings that could see the United States and UK open the door to easing, while Japan might lift borrowing costs in a step toward “normality”.
Oil prices inched up on fears of a widening conflict in the Middle East following a rocket strike in the Israeli-occupied Golan Heights, which Israel and the United States blamed on Lebanese armed group Hezbollah.
Also due this week is the US jobs report for July, closely watched surveys on US and global manufacturing, along with Eurozone gross domestic product and inflation data.
The US Treasury will outline how much bonds it plans to sell for the quarter, while China’s politburo meeting could reveal more stimulus following surprise rate cuts last week.
After a benign June inflation report, markets are wagering the Federal Reserve will lay the groundwork for a September rate cut at its policy meeting on Wednesday.
Futures are fully priced for a quarter-point easing and even imply a 12 percent chance of 50 basis points, and have 68 basis points of easing priced in by Christmas.
“The FOMC is set to hold steady but is likely to revise its statement to hint that a cut at the following meeting in September has become more likely,” wrote analysts at Goldman Sachs in a note.
“We now see the risks to the Fed path as tilted slightly to the downside of our baseline of quarterly rate cuts, though not quite as much as market pricing implies.”
The Bank of Japan also meets Wednesday and markets imply a 70 percent chance it will hike rates by 10 basis points to 0.2 percent , with some chance it could move by 15 basis points.
Investors are less sure whether the Bank of England will ease at its meeting on Thursday, with futures showing a 51 percent probability of a cut to 5 percent.
