(Bloomberg) — Asian stocks rose Thursday after US equities snapped a two-day slide on benign inflation data that supported expectations of a Federal Reserve interest rate cut this month.
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Japanese equities climbed while Australian stocks traded flat. Futures contracts for US equities edged lower in Asian trading after the Nasdaq 100 advanced 1.9% to a new high Wednesday, with the strong showing for tech pushing Amazon.com Inc and Meta Platforms Inc. to fresh records. Broadcom Inc. rose 6.6% following a report that the chipmaker was working on an AI deal with Apple Inc.
Yields for Australian government debt jumped and the Australian dollar strengthened on Thursday after data showed more jobs were added to the economy than expected and unemployment unexpectedly fell, in a sign of economic resilience. Treasuries were steady on Thursday after a selloff in the prior session sent yields higher across the curve.
The moves in Treasuries followed US consumer price index data that came in line with expectations, cementing forecasts for the Fed to cut rates by 25 basis points later in December. Swaps traders have now virtually priced in such a move, compared with a 75% chance a week ago.
“The fact that inflation is not slowing down rapidly reinforces the view that the economy will strengthen from next year onwards, and investors’ appetite for risk has increased,” said Takashi Ito, senior strategist at Nomura Securities.
An index of dollar strength fell Thursday, moderating a gain on Wednesday that was helped along by the higher Treasury yields. China’s yuan slid the most in a week following a report that Beijing is considering allowing the currency to weaken next year in response to the threat of a trade war with the US.
Meanwhile, China’s two-day Central Economic Work Conference is expected to map out policies for next year, following stimulus signals from top leaders.
Officials must focus on, “how will they deliver fiscal stimulus more directly to consumers so the economy can more directly shift to consumption-led rather than investment led,” Amy Xie Patrick, head of income strategies for Pendal Group, said on Bloomberg Television.
The yen strengthened against the greenback, paring a decline on Wednesday. Bank of Japan officials see little cost to waiting before raising interest rates, while still being open to a hike next week depending on data and market developments, according to people familiar with the matter.
Hikes, Cuts
Brazil’s central bank increased the benchmark interest rate by a full percentage point to 12.25% late on Wednesday, and promised to deliver two hikes of the same size in the next two meetings, as it rushes to recover investor confidence and tame inflation expectations.
The Canadian dollar advanced after hovering near a four and a half-year low once policymakers signaled they were ready to slow down on monetary easing. The Bank of Canada lowered its rate by half a percentage Wednesday, its second straight outsized cut.
The Swiss National Bank and European Central Bank are also expected to reduce interest rates Thursday.
In commodities, crude futures rose after a Bloomberg News report that the Biden administration is considering new sanctions on Russia’s oil trade, a move that could tighten the market. The White House warned that Russia may fire another intermediate-range ballistic missile at Ukraine, after what Moscow said were strikes on its territory with US-supplied weapons.
Wall Street’s fear gauge, the VIX, fell below 14 following the CPI data, an indication the market is expecting calm in the near-term. Stocks and long bonds stand to benefit as fears of a higher inflation print evaporate, according to ClearBridge Investments’ Jeff Schulze.
“The debate for the FOMC next week between cut or skip is over,” Schulze said. “This inflation print should be risk-asset friendly and provide a tailwind to equity markets as we move through one of the strongest seasonal periods of the year.”
Key events this week:
ECB rate decision, Thursday
US initial jobless claims, PPI, Thursday
Eurozone industrial production, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.2% as of 9:56 a.m. Tokyo time
Hang Seng futures were little changed
Nikkei 225 futures (OSE) rose 1.5%
Japan’s Topix rose 1.2%
Australia’s S&P/ASX 200 was little changed
Euro Stoxx 50 futures were unchanged
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro was little changed at $1.0504
The Japanese yen rose 0.2% to 152.20 per dollar
The offshore yuan was little changed at 7.2741 per dollar
The Australian dollar rose 0.6% to $0.6405
Cryptocurrencies
Bitcoin fell 0.8% to $100,761.48
Ether fell 0.4% to $3,815.49
Bonds
The yield on 10-year Treasuries was little changed at 4.27%
Japan’s 10-year yield advanced one basis point to 1.075%
Australia’s 10-year yield advanced eight basis points to 4.26%
Commodities
West Texas Intermediate crude rose 0.2% to $70.41 a barrel
Spot gold rose 0.1% to $2,722.27 an ounce
This story was produced with the assistance of Bloomberg Automation.
