A woman walks in front of a screen displaying the Hang Seng Index in the Central District of Hong Kong, China, on March 17, 2023. Photograph: Reuters/Tyrone Siu/File Photo. Obtaining licensing rights
SYDNEY (Reuters) – Asian shares rose on Thursday as markets bet that U.S. interest rates have peaked after more dovish comments from Federal Reserve officials, while traders awaited the U.S. consumer price inflation report due later in the day for… More evidence on monetary policy.
Europe is poised to extend the rally, with EUROSTOX 50 futures up 0.3% and FTSE futures up 0.4%. S&P 500 and Nasdaq futures rose 0.3%.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.9% to a three-week high. Tokyo’s Nikkei (.N225) rose 1.7%, moving away from a five-month low hit last week.
News that Central Huijin Investment, a Chinese government fund, has raised its stakes in the country’s four major banks also boosted confidence in the broader market. Hong Kong’s Hang Seng Index (.HSI) jumped 2.0% and China’s blue-chip stocks (.CSI300) rose 0.8%.
However, China also issued a notice prohibiting local brokerage firms and their offshore units from taking on new mainland clients for trading abroad, which will restrict capital outflows, Reuters reported on Thursday.
Overnight, Wall Street closed higher after minutes from the Federal Reserve meeting showed a growing sense of uncertainty about the path of the US economy, as volatile data and tightening financial markets posed risks to growth and prompted policymakers to extend interest rate suspensions last month.
The recent boom in sentiment is also largely due to comments from more Fed officials suggesting that US interest rates may have peaked, leading to a welcome decline in Treasury yields.
US Federal Reserve Governor Christopher Waller said on Wednesday that rising market interest rates could help the Fed slow inflation and allow the central bank to “watch and see” whether its interest rate needs to rise again.
Waller has been among the most vocal advocates of raising interest rates to fight inflation, and his comments added weight to similar statements made this week by Federal Reserve Vice Chairman Philip Jefferson and Dallas Fed President Lori Logan.
The dollar drifted near its lowest level in two weeks, but the yen remains under pressure at 149.09 yen to the dollar, a little far from the 150 level that might prompt Japanese authorities to intervene.
Markets moved to reduce the chance of the Fed raising interest rates in November to just 9%, down from 13.2% the day before, and there is a 70% chance the rate has already peaked, according to CME FedTool.
With the Fed’s long-awaited shift approaching, traders are gearing up for the all-important US consumer inflation report due later on Thursday. The risks are higher because the producer price inflation report came in hotter than expected on Wednesday.
Economists expect the headline CPI to rise 0.3% in September on a monthly basis, slowing from 0.6% in August, while the core CPI is expected to remain steady at 0.3%.
An upward surprise in the base rate of 0.4% or more would surprise investors, although geopolitical risks would likely prevent the bond market from trading too bearish on stronger data, said Alan Ruskin, chief international strategist at Deutsche Bank.
“The most lasting impact on the data is likely to come from the core figure of 0.4% month-on-month, which means the two most important data releases for the September numbers (non-farm payrolls and CPI) will support economic growth. The Fed remains hawkish,” he said.
Long-term Treasury yields fell for a third straight session, also benefiting from some safe-haven demand from the ongoing conflict in the Middle East.
Ten-year bond yields fell 3 basis points to 4.5706% on Thursday, retreating from a 16-year high of 4.8870%.
Oil prices continued to decline on Thursday after Saudi Arabia, the largest producer in the Organization of the Petroleum Exporting Countries (OPEC), pledged to help stabilize the market amid fears of supply disruption due to the conflict between Israel and the Palestinian Islamist group Hamas.
Brent crude futures fell 0.3 percent to $85.56 a barrel, after a two percent decline in the previous session. US West Texas Intermediate crude fell 0.5% to $83.08, after falling 2.9% on Wednesday.
The spot price of gold rose 0.3 percent to $1,878.98 per ounce, the highest level in two weeks.
Reported by Stella Q. Edited by Shri Navaratnam and Jimmy Freed
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