Asian stocks rise; positive metals growth in manufacturing sector

Tom Westbrook resonance reporting

SINGAPORE (Reuters) - Prices of industrial metals extended gains on Tuesday on expectations of a rebound in the global manufacturing sector, while Asian stocks were slightly more cautious ahead of U.S. inflation data and a key European Central Bank meeting this week.

The Morgan Stanley Capital International (MSCI) broadest index of Asia-Pacific equities outside of Japan rose 0.2%. Japan's Nikkei index rose 0.6%.

Shanghai copper futures rose 1% to a two-year high, accumulating more than 10% in a month, Shanghai zinc futures hit a five-month high, and Shanghai aluminum futures hit a 22-month high on Monday. [MET/L]

Even ironstone, which has been affected by the downturn in China's real estate sector, has stabilized at over US$100 per ton in Singapore. [Ironstone].

"It's almost a bet on China," says Vishnu Varathan, Mizuho Bank's Singapore-based economist.

This coincides with the bottoming out of the global manufacturing sector, which I think will be very beneficial to China's industrial recovery," he said. It's a broader-based story for metals."

On Monday, data showed that German industrial production rose more than expected in February.

Last week's data showed that U.S. manufacturing grew for the first time in a year and a half. Manufacturing activity in China expanded in March for the first time in six months.

Precious metals are also on the rise, with gold hovering just below its all-time high of $2,353 set on Monday. So far this year, spot gold has risen nearly 14%.[GOL/]

Silver hit a new high since mid-2021 on Monday and platinum was also sharply higher. Brent crude oil fell below recent highs but remained above $90 a barrel at $90.62.

Although Hong Kong's Hang Seng Index rose 1.2% in the morning, China's stock market didn't join in the revelry.

The Australian dollar has risen nearly 2% in a week and was trading at $0.6605 on Tuesday. The New Zealand dollar is back above $0.60, having hit a two-week high of $0.6047 earlier.

China's Renminbi exchange rate has fallen by about 1.8% this year, bottoming out near 7.3 per US dollar.

Future CPI and ECB

For global stocks, bonds and currencies, the main focus this week will be on U.S. inflation data due Wednesday and the ECB meeting on Thursday.

Expectations for US rate cuts have been weakening. In January, the market was expecting a rate cut of more than 150 basis points, but now investors are not even sure of half of the cut.

Annualized rounded inflation in the U.S. rose to 3.4% in March from 3.2% a month earlier. The yield on the U.S. two-year bond, which tracks expectations for short-term interest rates, reached its highest since the end of November at 4.801%, while the yield on the ten-year bond also reached its highest since 2024 at 4.46% on Monday.

However, the dollar struggled to follow interest rates higher, the euro firmed and commodity currencies rebounded amidst a hawkish ECB surprise.

The euro was quoted at $1.0860.

The ECB is expected to leave rates unchanged, but the market has pegged a rate cut for June.

"EUR/USD is still likely to stabilize around $1.0800 in the near term, although a fall to $1.07 or lower is more likely than a break above $1.09/1.10," said strategists at ING.

Meanwhile, the yen continues to face heavy pressure as investors see any lag in global interest rate cuts widening the gap with Japan's near-zero interest rates.

The JPY/USD exchange rate was at 151.87, just a hair's breadth away from last month's 34-year low of 151.975. Against the euro, the yen was at 164.96, the weakest in three weeks.

Japan's Finance Minister Shunichi Suzuki said, where the yen will not rule out any options to cope with excessive volatility, and reiterated his warning that Tokyo is ready to take action in response to the yen's recent sharp decline.

"We expect (Japan) to dry up above 152, but not immediately on a breakout," Steve Englander, a strategist at Standard Chartered, said in a note to clients.

(Edited by Himani Sarkar)