Sydney, Nov. 24 (BNA): Asian stocks followed higher on Wall Street, buoyed by signs the US Federal Reserve may slow the pace of interest rate hikes and news of fresh economic stimulus from China, with the dollar failing to recoup losses.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8% in early trade, supported by a 0.6% gain in South Korean stocks, a 0.5% gain in China, and a 0.9% jump in Hong Kong’s Hang Seng, Reuters reported.
Japan’s Nikkei rose 1.3%.
S&P 500 futures rose 0.2%, while Nasdaq futures rose 0.3%, after modest gains in US stocks on Wednesday.
The Bank of Korea slowed the pace of tightening to a more modest 25 basis points, joining other central banks turning away from huge gains amid a looming global recession.
Minutes of the US Federal Reserve’s latest meeting also showed that a “large majority” of Fed policy makers agreed that it was “probably appropriate soon” to slow the pace of rate hikes.
“Overall, it is clear from the record that FOMC participants are determined to increase the rate of policy in the face of an extremely tight labor market and unacceptably high inflation,” Barclays analysts said.
“However, the minutes also reveal an emerging difference in views among members about the peak rate, and uncertainty about the peak rate.”
The futures market indicates a 76% chance of a 50bp rise to 4.25%-4.5% at the December meeting, while the majority of investors expect the Fed’s target rate to be above 5% by next May.
US economic data on Wednesday showed that jobless claims increased more than expected last week, while business activity contracted for a fifth month in November.
In Japan, data on Thursday showed manufacturing activity contracted at the fastest pace in two years in November.
Meanwhile, in China, COVID cases have continued to rise, with economic losses from movement restrictions and lockdowns piling up.
China’s cabinet on Wednesday signaled the possibility of an upcoming cut in the reserve requirement ratio for banks, pledging new stimulus measures to revive its coronavirus-hit economy.
The US dollar failed to recoup last night’s losses of 1%, with the index standing at 105.89 against a basket of currencies.
In the oil market, prices are set to test a key support level from September, which if breached could see oil drop to levels not seen before late 2021, adding to evidence that inflation is likely starting to ease.
US crude oil futures fell 0.2% to $77.79 a barrel, after falling more than 3% on Wednesday, as the Group of Seven countries considered a ceiling on Russian oil prices above the current market level.
Brent crude futures fell 0.15% to $85.26.
In the bond market, long-term US Treasury bonds rebounded overnight after the Fed’s meeting minutes. 10-year yields fell to a whopping 79 basis points shortfall to two-year yields, a curve reversal on a scale not seen since the dot.com crash of 2000 and, on the face of it, a sign investors expect a deep economic contraction in the coming months.
US markets are closed for the Thanksgiving holiday on Thursday.
SM