Asian equities could see a positive start to the week as investors grow more optimistic about increased fuel demand in China and a weaker US dollar. According to reports, China’s May Day holiday travel bookings have surged past pre-COVID levels, indicating a boost in oil demand. This could lead to a flow of investments towards cyclical stocks in Asia. However, any correlation with US risk assets could impact short-term price action as US stocks trade mixed, with the tech sector lagging ahead of key earnings reports from Microsoft, Google, Meta and Amazon later in the week. The upcoming data pack before next week’s FOMC decision will also be closely watched.
Some market participants are revising their cyclical sector recommendations as positive data emerges, with Energy and Mining stocks emerging as top picks. Lower oil output and strong demand from China could lead to outperformance in oil-related stocks in the coming quarters. Some desks predict that Brent and WTI prices could rise by 23% over the next 12 months, which could help bolster company profits. Additionally, reports suggest that China is urging banks to cut deposit rates, potentially further boosting demand.
