Australia

Australian shares are set open lower amid a slip in global markets while the RBA is set to leave the cash rate unchanged at its meeting today.

The Australian SPI 200 futures contract was down 28 points, or 0.4 per cent, at 7138 points at 8.30am Sydney time on Tuesday, suggesting a negative start to trading.

US markets were closed as the country observed the Memorial Day public holiday.

Locally, economists are finalising their forecasts for key economic growth figures as the Reserve Bank board sits for its monthly meeting.

Treasury secretary Steven Kennedy and his senior team are also due to face a Senate hearing in Canberra to dissect the federal budget and the national economic outlook.

The central bank is widely expected to leave its key interest rates unchanged at a record low 0.1 per cent after its meeting on Tuesday.

The bank has already flagged any changes to its bond targeting and buying program will be announced in July.

Victoria's latest seven-day lockdown is due to end on Thursday night but new infections, while still small, have steadily grown over the past few days.

In its latest economic outlook, the Organisation for Cooperation and Development expects Australia to enjoy strong 5.1 per cent growth in 2021, but has warned this could be at risk if the COVID-19 vaccine is not widespread.

Victoria's lockdown is also expected to undermine the latest weekly ANZ-Roy Morgan consumer confidence index—a pointer to future household spending.

At this stage, Wednesday's national accounts for the March quarter are forecast to show economic growth of 1.1 per cent.

This would leave the annual rate at 0.3 per cent, meaning the economy has now fully recovered from last year's deep recession.

Economists will finalise their forecasts once the latest company profit, export and government finance data is dumped on Tuesday.

Also due is the CoreLogic home value index, which is expected to show a further gain of around two per cent for May, driven by a three per cent increase in Sydney house prices.

However, building approval figures for April are not expected to be so upbeat, dropping 10 per cent as a result of the government's HomeBuilder grants scheme closing in March.

Australia's share market set an all-time high as it finally climbed above levels of early last year, days before the coronavirus crash began.

The ASX200 set an intra-day record of 7203.3 on Monday and notched eight consecutive months of gains, a run not achieved since 2007.

Despite the early record on the ASX200, the index closed lower by 17.9 points, or 0.25 per cent, to 7161.6.

The All Ordinaries closed down by 17.3 points, or 0.23 per cent, to 7406.7.

The index of the top 500 companies also set a record high, 7448.3.

Meanwhile, the Australian dollar was buying 77.39 US cents at 8.30am, up from 77.32 US cents at Monday’s close.

Asia

China stocks eked out gains on Monday and posted their best monthly gain in six as soft domestic factory activity in May eased worries over policy tightening, while a stronger yuan boosted foreign inflows.

The blue-chip CSI300 index rose 0.2 per cent to 5,331.57, while the Shanghai Composite Index firmed 0.4 per cent to 3,615.48.

Hong Kong stocks inched up on Monday to post monthly gains, as China’s three-child policy powered birth- and fertility-related stocks.

The Hang Seng index rose 0.1 per cent to 29,151.80, while the China Enterprises Index gained 0.9 per cent to 10,889.12 points.

In Japan, the Nikkei 225 in Japan slipped 0.99 per cent to close at 28,860.08 while the Topix index shed 1.26 per cent to finish the trading day at 1,922.98.

Europe

European stocks slipped from record highs on Monday in subdued trading due to holidays in major markets, but optimism over a swift economic recovery helped the STOXX 600 index mark its fourth straight month of gains.

The pan-European index was down 0.5 per cent, with shares in Frankfurt and Paris dropping 0.6 per cent, each.

UK and US markets were closed for a holiday, keeping trading volumes muted across the board.

Among the top decliners was Deutsche Bank, down 1.3 per cent after the Wall Street Journal reported that the US Federal Reserve told the German lender it was failing to address persistent shortcomings in its anti-money-laundering controls.

Italian insurer Cattolica surged 15.1 per cent after bigger rival Assicurazioni Generali said it would launch a 1.17 billion euros ($1.81 billion) buyout offer for the company.

Despite lingering worries about rising inflation, the STOXX 600 posted a 2.1 per cent rise in May as economies gradually reopened after lockdowns and central banks reiterated support to aid the recovery.

Dovish comments from European Central Bank (ECB) policymakers, including President Christine Lagarde who said it was too early to discuss slowing its pandemic emergency bond purchases (PEPP), helped support sentiment last week.

Data showed German annual consumer price inflation accelerated in May, advancing further above the European Central Bank’s target of close to but below 2 per cent.

Among other movers, Swedish online property listings firm Hemnet rose 2.7 per cent after posting a 24 per cent jump in quarterly sales, helped by demand for large apartments and houses.

North America

US markets were closed for Memorial Day.

World equities were firmly on track to post a fourth straight month of gains on Monday, while the dollar struggled broadly ahead of European and US data this week that will provide a clearer picture on the global economy's recovery path.

MSCI's broadest index of world stocks drifted 0.1 per cent higher, putting the gauge on track for a 1.4 per cent gain for May. It is the longest monthly rising streak for the index since August 2020, when it marked a five-month run of gains, according to Refinitiv data.

But US stock futures edged lower and European cash equities trading was subdued on Monday due to holidays in the US and Britain, with benchmark indexes sticking to well-worn ranges.

May has proven to be a decent month for asset markets, but policymakers are increasingly faced with the dilemma that inflation is running hot while the underlying structural economy is still struggling to gain traction.

The main event of the week will be US payrolls on Friday with median forecasts at 650,000, but the outcome is uncertain following April's unexpectedly weak 266,000 gain.

Although US inflation data last week was above estimates, another big miss on the jobs front would heap pressure on the Fed to postpone plans to wind down its stimulus. read more

The Fed next meets on 16 June, and this week will be the last chance for members to discuss policy before a pre-meeting blackout period starts on 5 June.

So far, investors have taken the Fed at its word that the labour market needs to improve a lot more before it speaks of tapering. That helped yields on US 10-year notes ease to 1.58 per cent with Fed funds futures pricing in a first rate hike by the first quarter of 2023.

Asian shares edged higher, and in Europe indexes consolidated gains after last week's record close ahead of manufacturing PMI data on Tuesday.

Among central banks debating inflation trends, the European Central Bank is perhaps the outlier with both policymakers and investors on the same page when it comes to expecting a return to below-target inflation, according to Ulrich Leuchtmann, head of FX and commodity research at Commerzbank.

That was evident in the bond markets too, where yields on benchmark German debt remained well below recent highs.

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A dovish Fed has also put the greenback under pressure against its rivals with the dollar recouping some of its losses after hitting a three-year low against the Chinese yuan.

Concerns about global inflation and slowing growth have proved to be a boon for gold, with prices for the yellow metal rising 8 per cent this month, vaulting comfortably above $1900.

Oil prices were firm after gaining more than 5 per cent last week to reach two-year closing highs as expectations of a rebound in global demand outweighed concerns about more supply from Iran once sanctions are lifted.

All eyes will be on OPEC this week as it reviews its supply agreement, and any hint of an increase in output could pressure prices.

Brent added 1.4 per cent to $69.69 a barrel, while US crude rose 39 cents to $67.28.

Unusually quiet cryptocurrencies showed some signs of volatility in holiday-stricken trading with bitcoin rising 4 per cent to $37,000 while its smaller rival Ethereum climbed 8 per cent to $2,578.