By Rae Wee

SINGAPORE (Reuters) – Global stocks began the week on firmer footing ahead of a highly anticipated earnings release from Nvidia (NASDAQ: NVDA). Meanwhile, Japan's central bank governor left markets uncertain about the country's rate outlook.

Bank of Japan Update

Bank of Japan Governor Kazuo Ueda reiterated on Monday that the central bank will continue to raise interest rates if economic and price developments align with forecasts. However, he provided no indication of a potential hike in December.

His remarks were closely monitored for hints on the BOJ's next rate decision, intended to potentially counteract the yen's weakness. The Japanese currency has depreciated approximately 7% since October against a strengthening dollar, recently falling past the 156 per dollar mark for the first time since July. This depreciation has kept traders vigilant for possible intervention from Japanese authorities.

Currently, the yen is trading 0.3% lower at 154.72 per dollar, slightly recovering from losses during Ueda's speech. According to IG market analyst Tony Sycamore, the probability of a BOJ rate hike next month will largely depend on the dollar/yen exchange rate.

> “If dollar/yen's up at around 160, I think that would increase the chances of a rate hike. But I think he’s probably not unhappy with dollar/yen sitting around 150, 152,” he stated, indicating that such levels might keep the BOJ from acting until next year.

Japanese Market Movement

Despite the weaker yen, Japan's Nikkei index fell by 0.76%, primarily due to declines in healthcare company shares. Conversely, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7%, while Nasdaq futures increased by 0.6% and S&P 500 futures inched up 0.25%.

Earnings Focus: Nvidia

Investor attention this week centers on Nvidia's third-quarter results, expected to show a significant rise in revenue. Nvidia's shares have surged nearly 200% this year, heavily influencing the S&P 500's record highs. However, the company's stellar growth raises expectations for earnings performance, and a downturn could spark concerns about overinflated AI market optimism.

Chinese Stocks Surge

Chinese stock markets opened positively on Monday, with the CSI300 blue-chip index up 1.22% and the Shanghai Composite Index increasing by 1.34%, while Hong Kong's Hang Seng Index rose 1.5%.

U.S. Treasury Yields and Federal Reserve Outlook

U.S. Treasury yields remain near multi-month highs due to expectations for less aggressive rate cuts from the Federal Reserve. The 10-year yield is steady at 4.4315%, and the two-year yield is at 4.2990%. Futures indicate a 60% chance of a quarter-point Fed easing in December, with 77 basis points of cuts expected by late 2025—down from more than 100 just weeks ago.

Recent comments from Fed Chair Jerome Powell suggest higher borrowing costs may persist, while expected policies from U.S. President-elect Donald Trump could exacerbate inflation and restrict further rate cuts.

> “With changes afoot in immigration policy, tariff policy, and fiscal policy, Fed officials would tread more lightly in view of the inflationary impact these policies pose,” said Thierry Wizman, global FX and rates strategist at Macquarie.

At least seven Fed officials are scheduled to speak this week, likely expressing caution regarding aggressive rate cuts. This shift in outlook has buoyed the dollar, which remains near one-year highs at 106.66 against a basket of currencies.

European Central Bankers' Insights

Additionally, a number of European Central Bank officials are addressing the market this week, and they may adopt a more dovish stance due to recent soft economic indicators and potential tariffs impacting EU trade.

Commodity Prices

In commodities, oil prices strengthened on Monday, with Brent crude futures increasing by 0.18% to $71.17 per barrel. U.S. crude futures remained steady at $67.05 per barrel. Spot gold rose by 1.24% to $2,593.02 an ounce, recovering from last week's significant decline.