Asian stocks surge, India hits record high

June 03, 2024 (MLN): Asian stocks gained the most in more than two months, with India surging to a record as exit polls indicated a resounding victory for Prime Minister Narendra Modi’s party, as Bloomberg reported.

Equities in Australia, Japan, and Hong Kong advanced on Monday, pushing the MSCI Asia Pacific Index to its biggest increase since March 21. India’s Sensex outperformed.

Indian rupee and sovereign bonds also rose, as the election outcome puts Modi’s party in position to push through policy measures that are considered key for economic growth.

The rupee was among Asia’s top performers, climbing 0.5%.

“India is well positioned to scale manufacturing in select sectors like electronics, auto, pharma and textiles in the next decade,” Bank of America Corp. analysts including Amish Shah wrote.

The government support “would make India an ideal and reliable partner for companies who are looking to shift manufacturing away from China.”

Adding to the impetus was data showing the outlook for Asia’s manufacturing sector is improving, with Japan’s factory reading rising above 50.0 for the first time in a year in May, and data from China, Korea and Taiwan showing gains also.

But politics may inject volatility, with tensions surrounding the Middle East and the US election simmering.

More broadly, sentiment has gotten a boost from a weaker dollar in recent weeks, as investors hope the Federal Reserve will finally begin to ease policy.

Friday’s reading of core personal consumption expenditures — the Fed’s preferred measure for inflation — showed the smallest increase this year.

Yields on Australian bonds and those on 10-year Treasuries edged lower.

Oil fluctuated after OPEC+ set out a plan to restore some production as early as October, despite concerns over the demand outlook and robust supply from outside of the group.

In Mexico, Claudia Sheinbaum is set to become the country’s first female leader in a landslide victory, capitalizing on outgoing President Andres Manuel Lopez Obrador’s popularity while also inheriting rampant criminal violence and a large fiscal deficit left by his government.

This week, traders will be closely watching inflation prints across emerging markets including Indonesia, South Korea, and Chile, as well as growth data in Australia and Europe.

The European Central Bank may open the door to a weaker euro on Thursday as its first interest-rate cut of the cycle. A US jobs report is released on Friday.

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