World shares climb on U.S. stock gains, China gains, Japan weakens

U.S. stock futures climbed on Monday, buoyed by renewed expectations that the Federal Reserve will likely ease interest rates this year, while the yen weakened after suspected currency intervention by Japanese authorities last week.

Futures pointed to a higher open on Wall Street, with the S&P 500 and Nasdaq futures up 0.3% and 0.2%, respectively, extending Friday's gains following a U.S. nonfarm payrolls report that reignited hopes of a soft economic landing. The data reinforced bets that Fed rate cuts would most likely come in 2023, after Chair Jerome Powell maintained the central bank's easing bias last week.

"The data point to a jobs market that is still tight, but not nearly as hot as it was a year or two ago," said economists at Wells Fargo. "This should support a further slowdown in inflation as the year progresses, even if improvement proceeds only gradually."

Traders will closely watch whether the S&P 500 breaches the key 50-day moving average of 5,130, an important price point, according to Florian Ielpo, head of macro at Lombard Odier Investment Managers. "If we breach this level, we'll continue to see an uptrend of new highs, but if it is missed, it could take a couple of days or even weeks to return to these levels," Ielpo said.

The dollar held broadly steady on Monday, keeping the euro away from a one-month high at $1.0771, while sterling rose 0.2% to $1.2575.

In Europe, Goldman Sachs raised its 2024 earnings growth forecast for STOXX 600 companies to 6% from 3% earlier, citing the impact of higher oil prices and a weaker euro on corporate earnings.

With public holidays in the UK and Japan, markets in mainland China and Europe also got off to an upbeat start, benefiting from the renewed U.S. optimism. Europe's index rose 0.7% by mid-session.

Oil prices were in focus on the prospects of Saudi Arabian price hikes and rising tensions in the Middle East, with Brent crude futures up 73 cents to $83.69 a barrel and U.S. crude futures 81 cents higher at $78.92 per barrel. Amid escalating tensions, Israel's military called on Palestinian civilians to evacuate Rafah as part of a "limited scope" operation, though it did not confirm media reports of preparations for a ground assault.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan peaked at its highest level since February 2023, gaining 0.7%, while China's blue-chip index closed 1.5% higher. Hong Kong's Hang Seng Index rose 0.55% on Monday, extending its longest daily winning streak since 2018.

The rebound in Chinese markets followed a Politburo meeting where policymakers vowed to step up support for the economy with prudent monetary and proactive fiscal policies. Data on Monday also showed China's services activity expansion slowed slightly amid rising costs, but new orders accelerated, and business sentiment improved.

Meanwhile, traders remained on alert for further volatility in the yen after suspected intervention by Japanese authorities last week to stem the currency's sharp slide. Tokyo is suspected of spending more than 9 trillion yen ($59 billion) to support the yen, pushing it from a 34-year low of 160.245 per dollar to around 151.86 over the span of a week.

The yen gave back some of those gains on Monday, trading 0.5% lower at 153.765 per dollar after briefly weakening past the 154 level earlier in the session.