Asian equities surge as traders pull back Fed wagers: Wrap of Markets

(Bloomberg) — Shares in Asia climbed following the performance of Wall Street as traders scaled down their bets on a Federal Reserve interest rate increase, fueled by optimism that China’s additional stimulus would revive risk-off sentiment. We will grasp it.

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The Asian benchmark for equities saw its longest winning streak since the beginning of September, rising for the fifth consecutive day. Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that rates will not remain indefinitely as high as they currently are and that the recent comments from a US central bank official have fostered hopes that rates could be raised for now.

“In recent times, bond yields have tightened, indicating that financial conditions have become constricted,” said Daly, who does not participate in rate decisions this year, on Tuesday. “If the conditions are constricted, maybe the Fed doesn’t need to take as much action.”

Hong Kong equity shares experienced more than a 1% surge, while mainland shares climbed after Bloomberg reported that China is contemplating widening its budget deficit as part of the government’s preparations to introduce fresh stimulus. South Korea’s Kospi benchmark reversed its course from being on the verge of a technical correction. Samsung Electronics Co trimmed its gains as traders concentrated on a narrow clip of profit declines from the chip behemoth.

In Asia trading, treasuries led the way, extending the rally from Tuesday after US government bond yields endured their greatest one-day decrease of the entire year. Currently, Fed swaps indicate a probability of more than 60% that the Fed will maintain their position in December, compared to merely a 60% chance of another hike just a week prior.

The Bloomberg Dollar Index plummeted for the sixth consecutive day as the Fed modified its position. Emerging markets currencies made strides, with the Korean won leading the pack.

“Policymakers have started to accept the notion that there is less need for additional policy action, given that financial conditions have considerably tightened in response to the recent surge in Treasury yields,” said Ben Jeffery at BMO Capital Markets. “This acceptance would have alleviated concerns regarding the necessity for further rate increases.”

Investors, according to Anna Wong at Bloomberg Economics, will be closely watching the minutes of the September Fed meeting on Wednesday for any indications that the central bank might not follow through with the previously projected final hike. Wong stated that two upcoming economic indicators of significance—the consumer price index on Thursday and the University of Michigan consumer sentiment survey on Friday—could provide more conclusive information.

Read: US consumers view a likelihood of increased inflation and tightened debt in the near future

Geopolitics also remained under scrutiny for global investors. President Joe Biden remarked that the US is “expanding” military aid to Israel in response to the surprise attack carried out by the Palestinian militant group Hamas. The White House stated on Tuesday that the United States will encourage Qatar to negotiate with Hamas regarding the return of American hostages taken during the incursion into Israel over the weekend.

Billionaire investor Paul Tudor Jones informed CNBC that the current geopolitical environment is “the most perilous and challenging” he has witnessed since the Hamas attack on Israel over the weekend, and he predicted that the US will plunge into a recession early next year.

Investors will keep a close watch on Japan’s government five-year bond auction on Wednesday. Additionally, oil maintained most of the gains it experienced earlier in the week as the Israel-Hamas conflict remained under control, and Saudi Arabia pledged to ensure market stability.

Key events of this week:

• Germany CPI, Wednesday

• NATO defense ministers meeting in Brussels on Wednesday

• Russia Energy Week in Moscow, featuring officials from OPEC members and others, on Wednesday

• US PPI, Wednesday

• Minutes of the Fed’s September policy meeting, Wednesday

• The Fed’s Michelle Bowman and Raphael Bostic speaking at separate events on Wednesday

• Japan Machinery Orders, PPI, Thursday

• Bank of Japan’s Asahi Noguchi speaking, Thursday

• UK industrial production, Thursday

• US initial jobless claims, CPI, Thursday

• The European Central Bank publishing accounts of its September policy meeting on Thursday

• Fed’s Rafael Bostic speaking, Thursday

• China CPI, PPI, Trade, Friday

• Eurozone industrial production, Friday

• US University of Michigan consumer sentiment, Friday

• Results from Citigroup, JPMorgan, Wells Fargo, BlackRock, quarterly earnings season begins on Friday

• G20 finance ministers and central bankers meeting on Friday as part of the IMF gathering

• ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva speaking at IMF panel on Friday

• Fed’s Patrick Harker speaking, Friday

Notable market movements:

Shares

• S&P 500 futures showed little change as of 10:40 a.m. Tokyo time. S&P 500 rose by 0.5%

• Nasdaq 100 futures rose by 0.1%. Nasdaq 100 rose by 0.6%

• Topix in Japan fell by 0.1%

• Hang Seng in Hong Kong surged by 1.5%

• S&P/ASX 200 in Australia rose by 0.5%

Currencies

• The Bloomberg Dollar Spot Index remained relatively stable

• The euro remained relatively stable at $1.0603

• The Japanese yen remained relatively stable at 148.66 per dollar

• The offshore yuan remained relatively stable at 7.2918 per dollar

• The Australian dollar remained relatively stable at $0.6430

Cryptocurrency

• Bitcoin remained relatively stable at $27,429.75

• Ether rose by 0.8% to $1,571.83

Bonds

Commodities

This story was created with the assistance of Bloomberg Automation.

– With the assistance of Stephen Kirkland.

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Source: ca.finance.yahoo.com