Stocks, bonds rise on hopes Fed tightening is over: markets wrap
Shares in Asia jumped tracking gains in US stocks and bonds after the Federal Reserve signalled its policy tightening cycle may be over.
Benchmarks in Australia, Japan and South Korea rose, while Chinese stocks also opened higher, fueling gains in a regional gauge. The moves echoed a 1.1% rally in the S&P 500 on Wednesday that placed the index on track for its best week since March. US equity futures edged higher in early Asian trading.
Australian and New Zealand yields fell, mirroring a Wednesday decline in Treasury yields, which slid further on Thursday. The 10-year benchmark shed 20 basis points on Wednesday in a move initially triggered by the Treasury’s plans to slow the pace of increases in its long-term debt sales. The Treasury said it will sell $112-billion of long-term securities at its quarterly refunding auctions next week, slightly less than major dealers expected.
Lower Treasury yields weighed on the greenback, which weakened against major currencies, and helped buttress the yen. The Japanese currency strengthened early on Thursday extending gains from Wednesday.
Fed chair Jerome Powell left the door open for further hikes in the central bank’s Wednesday decision, but noted that financial conditions have “tightened significantly in recent months driven by higher, longer-term bond yields, among other factors”.
“We don’t expect any further hikes this cycle,” said James Knightley, chief international economist for ING Financial Markets LLC. “Higher household and corporate borrowing costs are starting to bite.”
US jobs data painted a mixed picture. There were more job openings than forecast, according to the latest JOLTS data, while ADP’s private payrolls figures showed fewer new roles than anticipated. Initial jobless claims figures will be released later on Thursday.
Some observers remained cautious about the Fed’s policy path. There is “a likelihood for another 25” basis points of rate increase in the hiking cycle, Stephen Dainton, co-head of global markets at Barclays Plc, said in an interview with Bloomberg Television.
Elsewhere, the Bank of England is expected to hold rates for a second consecutive meeting on Thursday, as inflation concerns ease.
Back in Asia, South Korea’s inflation unexpectedly accelerated in October, reinforcing the case for the local central bank to keep its restrictive policy in place for longer. Meanwhile, Japanese Prime Minister Fumio Kishida announced a larger-than-expected economic stimulus package.
Other economic releases on Thursday include a monetary policy decision in Malaysia and PMI data for Singapore. Investors will also be keeping an eye on earnings releases from Tata Motors Ltd and Adani Enterprises.
Other companies due to release results include Eli Lilly & Co and Novo Nordisk, while Apple will deliver its latest earnings later on Thursday in the US. Corporate highlights on Wednesday included Qualcomm providing a better-than-expected revenue forecast for the current quarter while Airbnb gave a disappointing outlook for the fourth quarter.
West Texas Intermediate, the US oil benchmark, advanced more than 1% to above $81 per barrel, retracing a decline on Wednesday. Gold was steady and bitcoin traded largely unchanged at around $35,500.