A woman walks past a man examining an electronic board showing Japan’s Nikkei average and stock prices outside a brokerage firm, in Tokyo, Japan, March 20, 2023. Portal/Androniki Christodoulou/File Photo ACKNOWLEDGE RIGHTS
- U.S. Consumer Price Index for October stagnates against expected rise of 0.1%
- Fed funds futures price in rate cuts by May
- JGBs rise as the Japanese economy shrinks
SINGAPORE, Nov 15 (Portal) – Asian shares rose to a two-month high on Wednesday on expectations of stimulus measures in China and an end to interest rate hikes in the United States, while the dollar suffered sharp losses amid benign U.S. inflation report.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 2.3% by the Hong Kong session break, hitting its highest level since mid-September and on track for its biggest daily gain since January.
The Hang Seng (.HSI) rose nearly 3% and broke its 50-day moving average, while Japan’s Nikkei (.N225) gained 2.3%.
Bond markets from Australia to South Korea posted their strongest gains since March, although rallies in government bonds and U.S. and European stock futures ended in steady trading.
Data on Tuesday showed that overall U.S. consumer prices remained unchanged in October, defying expectations for a 0.1% rise. The core CPI was also below the forecast of 0.3% at 0.2%.
“I think the CPI number has just made the last person cover their shorts,” Naka Matsuzawa, Nomura’s chief macro strategist, said by phone from Tokyo.
He envisions a “more complicated” process in which the stock market’s exuberance eventually collides with the bond market’s expectation that an economic slowdown will lead to interest rate cuts.
“The bond market is probably more vulnerable than the stock market,” he said.
Overnight, the Nasdaq (.IXIC) rose 2.4% and the small-cap Russell 2000 index (.RUT) rose 5%. The US dollar lost 1.6% against the euro and 2% against the Australian and New Zealand dollars.
Interest rate futures have priced in a rate cut as early as May, with a 30% chance it could come even sooner, in March. Two-year Treasury yields fell 22 basis points overnight and remained broadly stable at 4.84% in Asian trading.
UK inflation data (due at 07:00 GMT), US retail sales (due at 13:30 GMT) and an expected morning meeting between US President Joe Biden and his Chinese counterpart Xi Jinping in San Francisco are next in focus for financial markets .
BEIJING SUPPORT
Also helping markets in Asia to cheer were strong industrial production and retail sales in China, as well as a Bloomberg News report that China plans to provide 1 trillion yuan ($137 billion) in low-cost financing to boost the real estate market.
Iron ore rose to a two-and-a-half-year high and copper to a three-week high in Shanghai.
The mainland CSI300 index (.CSI300) rose 0.6%. The Hang Seng Mainland Real Estate Developer Index (.HSMPI) rose 4.3%.
China’s retail sales rose 7.6% in October, although this may have been flattered by the Golden Week holiday earlier in the month. The real estate market remains in deep crisis, with investment falling by 9.3% year-on-year in January and October.
“It is clear that Beijing has become more proactive in recent weeks to support the recovery,” HSBC economists said in a note to clients. “Given the ongoing uncertainties in the real estate sector, we expect Beijing to further increase its support through fiscal and monetary means.”
A weaker dollar helped push the yuan to a three-month high of 7.2356 per greenback. The euro, which broke through its 200-day moving average overnight, held steady at $1.0877 and sterling made strong gains at $1.2491.
Australian wages data released on Wednesday showed high inflation was impacting pay deals, although annual growth of 4% was still well below many other developed countries.
Official data showed Japan’s economy shrank from July to September, leaving the yen unloved as the slowdown dampens expectations of a rate hike. The yen hit a 16-year low of 163.9 yen per euro, giving up some of Tuesday’s gains to trade at 150.68 per dollar.
Two-year Japanese government bonds enjoyed their strongest rally since April 2022, with the yield falling more than 3 basis points to 0.055%.
Brent crude futures rose 0.4%, or 31 cents a barrel, to $82.78.
(This story has been re-archived to correct the spelling of “Russell” in paragraph 9)
Reporting by Tom Westbrook; Edited by Edmund Klamann
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