Asian Stocks Rise After US Inflation Backs Fed Cut: Markets Wrap

(Bloomberg) — Asian stocks climbed Thursday after US equities snapped a two-day slide on benign inflation data that supported expectations of a Federal Reserve interest-rate cut this month.

Chinese and Japanese equities led gains in the region, with the MSCI Asia Pacific index climbing the most in a week. A gauge of Chinese shares trading in Hong Kong rallied as much as 2% while the mainland benchmark CSI 300 Index jumped nearly 1%. US stock futures edged lower.

“Little surprises on the inflation front have paved the way for a more supportive risk environment across the region,” said Jun Rong Yeap, market strategist at IG Asia Pte. “The broader theme around a US soft landing, Fed’s easing and positive year-end seasonality may continue to see the equities markets squeezing out gains to end the year well, coupled with less over-bought conditions.”

US consumer price index data released on Wednesday was in line with expectations, cementing forecasts for the Fed to cut rates by 25 basis points later in December. Swaps traders have now virtually priced in such a move, compared with a 75% chance a week ago. An index of dollar strength fell Thursday, moderating a gain on Wednesday that was helped along by the higher Treasury yields.

Asian equities have rebounded after recording back-to-back monthly losses as expectations of more growth measures from Beijing and a likely Fed rate cut bolster sentiment. Traders are awaiting details from China’s two-day Central Economic Work Conference that is expected to map out policies for next year, following stimulus signals from top leaders.

“The conclusion of the CEWC should bring more clarity on policy path, which should reflect the tone of the Politburo meeting of more support measures in the coming year,” said Marvin Chen, a Bloomberg Intelligence analyst.

Chinese authorities set a stronger-than-expected yuan fixing on Thursday, extending their support for the currency after it slid on a Reuters report that the nation is considering FX depreciation next year.

Elsewhere, yields on Australian government debt jumped and the currency strengthened on Thursday after data showed more jobs were added to the economy than anticipated and unemployment unexpectedly fell. US Treasury yields edged higher.

In the foreign-exchange market, the won slipped as South Korea’s political troubles persisted. President Yoon Suk Yeol accused the opposition of trying to paralyze his administration and siding with North Korea in a defiant speech as the chief of his own party called for his impeachment. 

The yen eked out a gain after falling in the previous three sessions. Bank of Japan officials see little cost to waiting before raising interest rates, while still being open to a hike next week depending on data and market developments, according to people familiar with the matter. 

January is now the most popular timing among BOJ watchers predicting when the next rate hike may come, though more than 40% still expect a move from the central bank next week, according to the latest Bloomberg survey. 

“Central bank messaging is really mixed at this point, which is a signal that they are not in a rush to hike rates,” Charu Chanana, chief investment strategist at Saxo Markets, told Bloomberg TV. “From BOJ perspective, appointment of Trump could bring further weakness in the yen and that’s why they might want to preserve ammunition in December and to be able to move in January.”

In the meantime, traders are awaiting interest-rate decisions from the Swiss National Bank and European Central Bank on Thursday, with economists predicting that both policymakers will reduce borrowing costs.

In commodities, oil was steady after three days of advances, as the US looked increasingly likely to further sanction Russia’s and Iran’s energy sectors. Gold slipped.

Key events this week:

• ECB rate decision, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone industrial production, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 1:48 p.m. Tokyo time
• Nasdaq 100 futures fell 0.2%
• Japan’s Topix rose 1.1%
• Australia’s S&P/ASX 200 fell 0.2%
• Hong Kong’s Hang Seng rose 1.7%
• The Shanghai Composite rose 0.6%
• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro was little changed at $1.0506
• The Japanese yen rose 0.2% to 152.21 per dollar
• The offshore yuan rose 0.2% to 7.2639 per dollar

Cryptocurrencies

• Bitcoin fell 0.9% to $100,729.37
• Ether rose 2% to $3,907.29

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.28%
• Australia’s 10-year yield advanced nine basis points to 4.28%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold fell 0.2% to $2,712.58 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Yasutaka Tamura and Zhu Lin.

©2024 Bloomberg L.P.