Stock market bullish as stocks surge on rate outlook, attention on Fed minutes

(Bloomberg) — Shares increased in Asia as traders reduced bets on a rate hike by the Federal Reserve, hopeful that further Chinese stimulus would mitigate gains.

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A benchmark for Asian equities progressed for a fifth day, experiencing its longest winning streak since early September. U.S. stock futures rose following the S&P 500 and Nasdaq 100 both climbing 0.5% on Tuesday, while European contracts fell.

Prior to the minutes of its September meeting on Wednesday, Fed Bank of San Francisco President Mary Daly suggested that tighter financial conditions could mean the central bank “doesn’t need to do so much,” following dovish remarks. The latest in a series that has raised interest rate expectations may still be on the rise.

Hong Kong equities advanced, led by tech shares, while mainland shares rose after Bloomberg reported that China is contemplating widening its budget deficit as the government prepares to deliver fresh stimulus.

“Asian shares received a dual boost today from a less dovish stance by Fed members as well as speculation about China’s stimulus,” said Charu Chanana, market strategist at Saxobank. “However, if the Fed wants to witness the market willing to continue raising rates, it will have to remain higher for a more prolonged period, and there are risks that geopolitical tensions could escalate.”

Investors will be scrutinizing the minutes for any indications that the Fed may not follow through with the most recent hike indicated in its economic projections, according to Anna Wong at Bloomberg Economics. Additionally, Germany’s final inflation data for September is also expected.

Ten-year Treasuries stabilized after Tuesday’s gains when U.S. government bond yields recorded their most significant one-day decline all year. Fed swaps currently indicate a greater than 60% probability that the Fed will remain on hold in December, compared to only a 60% chance of another hike just a week ago.

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The Bloomberg Dollar Index remained largely unchanged after a fifth consecutive session of decline. Currencies in emerging markets across Asia rose, with the Korean won and Thai baht advancing.

Read more: Thai rates panel considers policy settings appropriate to support growth

“Policymakers have begun acknowledging a reduced need for further policy action, as financial conditions have significantly tightened following the recent surge in Treasury yields,” said Ben Jeffery at BMO Capital Markets. “This approval would assuage concerns about the necessity for additional rate increases.”

Global investors also closely monitored geopolitical issues. U.S. President Joe Biden pledged full support to Israel, including munitions and intelligence assistance.

Oil continued its gains after a surge earlier in the week, as the Israel-Hamas war remained under control and Saudi Arabia vowed to help ensure market stability. Gold remained steady near its highest level this month.

In Asia, South Korea’s Kospi benchmark led regional advances, on track for its most substantial gain in nine months. Samsung Electronics Co provided the most significant boost as traders focused on a narrow clip of profit declines from the chip giant.

Major events of this week:

• Germany CPI, Wednesday

• NATO defense ministers meeting in Brussels on Wednesday

• Russia Energy Week in Moscow, with officials of 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 speak at separate events on Wednesday

• Japan Machinery Orders, PPI, Thursday

• Bank of Japan’s Asahi Noguchi speaks, Thursday

• UK industrial production, Thursday

• US initial jobless claims, CPI, Thursday

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

• Fed’s Rafael Bostic speaks, 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 meet on Friday as part of the IMF gathering

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

• Fed’s Patrick Harker speaks, Friday

Some key movements in the markets:

shares

• S&P 500 futures remained largely unchanged at 6:39 a.m. London time. S&P 500 rose 0.5%

• Nasdaq 100 futures rose 0.2%. Nasdaq 100 rose 0.6%

• Japan’s topics were slightly changed

• Hong Kong’s Hang Seng rose 1.8%

• Shanghai Composite rose 0.2%

• Euro Stoxx 50 futures fell 0.5%

currencies

• The Bloomberg Dollar Spot Index remained largely unchanged

• The euro remained largely unchanged at $1.0607

• The Japanese yen fell 0.1% to 148.88 per dollar

• Offshore yuan remained largely unchanged at 7.2912 per dollar

• The Australian dollar fell 0.2% to $0.6420

• The British pound remained largely unchanged at $1.2293.

cryptocurrency

• Bitcoin fell 1.1% to $27,108.3

• Ether fell 0.2% to $1,556.96

bond

• The yield on 10-year Treasuries declined one basis point to 4.64%

• Japan’s 10-year yield fell one basis point to 0.765%

• Australia’s 10-year yield fell three basis points to 4.43%

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This story was generated with the assistance of Bloomberg Automation.

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