A woman walks past a screen displaying the Hang Seng Index in the Central District in Hong Kong, China, March 17, 2023. Portal/Tyrone Siu/File Photo Acquire LICENSE RIGHTS
SYDNEY, Oct 12 (Portal) – Asian stocks rose on Thursday as markets bet that U.S. interest rates have peaked after more dovish remarks from Federal Reserve officials while traders looked ahead to the U.S. consumer inflation report which will be released later in the day for further monetary policy guidance.
Europe looks set to continue the rally with EUROSTOXX 50 futures up 0.3% and FTSE futures up 0.4%. S&P 500 futures and Nasdaq futures rose 0.3%.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 0.9%, hitting its highest level in three weeks. The Nikkei (.N225) in Tokyo rose 1.7%, climbing from a five-month low hit last week.
News that Central Huijin Investment, a Chinese sovereign wealth fund, increased stakes in the country’s four major banks also boosted confidence in the broader market. Hong Kong’s Hang Seng Index (.HSI) rose 2.0% and China’s blue chips (.CSI300) rose 0.8%.
However, China has also issued a notice banning domestic brokers and their overseas units from attracting new mainland clients for offshore trading, which will restrict capital outflows, Portal reported on Thursday.
Overnight, Wall Street closed higher after Fed minutes showed a growing sense of uncertainty over the path of the U.S. economy, with volatile data and tighter financial markets posing risks to growth and prompting policymakers last month , to extend an interest rate break.
The recent uptick in sentiment is also due in large part to comments from other Fed officials suggesting that U.S. interest rates may have peaked, triggering a welcome decline in Treasury yields.
Federal Reserve Governor Christopher Waller said on Wednesday that higher market interest rates could help the Fed slow inflation and allow the central bank to “watch and see” whether or not it needs to raise its own interest rate again.
Waller has been one of the most vocal proponents of higher interest rates to combat inflation, and his comments added weight to similar statements this week by Fed Vice Chair Philip Jefferson and Dallas Fed President Lorie Logan.
The dollar drifted near a two-week low, but the yen is still under pressure at 149.09 per dollar, just a touch away from the 150 level that could trigger intervention by Japanese authorities.
Markets have moved to further reduce the odds of a Fed rate hike in November to just 9% from 13.2% the previous day, and there is a 70% chance that the key rate has already peaked, according to CME FedTool.
With the Fed’s long-awaited reversal in sight, traders are preparing for the all-important U.S. consumer inflation report due later on Thursday. The stakes are higher as a producer price inflation report on Wednesday came in hotter than expected.
Economists expect the headline consumer price index (CPI) to rose 0.3% on a monthly basis in September, slowing from 0.6% in August, while the core CPI was steady at 0.3%.
Alan Ruskin, chief international strategist at Deutsche Bank, said a surprise rise in core interest rates of 0.4% or more would surprise investors, although geopolitical risks would likely keep the bond market from trading too pessimistically on better data.
“A more sustained impact on the data would likely come from a core reading of 0.4% month-over-month, which would mean that the two main data releases for September numbers (non-farm payrolls and CPI) would both be in favor,” the Fed remains restrictive,” he said.
Long-term government bond yields fell for a third straight session, also benefiting from some safe-haven demand due to the ongoing conflict in the Middle East.
Ten-year yields fell 3 basis points to 4.5706% on Thursday, after hitting a 16-year high of 4.8870%.
Oil prices continued their decline on Thursday after top OPEC producer Saudi Arabia pledged to help stabilize the market amid fears of supply disruptions caused by the conflict between Israel and the Palestinian Islamist group Hamas.
Brent futures fell 0.3% to $85.56 a barrel, after falling 2% in the previous session. U.S. West Texas Intermediate crude fell 0.5% to $83.08, after falling 2.9% on Wednesday.
Spot gold rose 0.3% to $1,878.98 an ounce, about its highest in two weeks.
Reporting by Stella Qiu; Editing by Shri Navaratnam and Jamie Freed
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