Asia Stocks Rally Boosted by Fed Easing Signs, China Stimulus

 

Asian indexes rallied on Thursday, buoyed by hopes the US Fed is poised to ease back on its aggressive interest rate hikes policy and news of fresh economic stimulus from China.

That lift was first felt in Japan where Tokyo’s main index closed at its highest level in more than two months. That was despite data showing Japan’s manufacturing activity contracted at its fastest pace in two years in November.

The Nikkei share average ended 0.95% higher at 28,383.09 – the highest level since September 13 – while the broader Topix jumped 1.21% to 2,018.80.

 

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Wall Street’s main indexes ended overnight with solid gains after the Fed’s November meeting minutes showed interest rate hikes may slow soon.

The readout of the November 1-2 meeting, at which the Fed raised its key rate by 75 basis points for the fourth straight time in an effort to combat decades-high inflation, showed officials were largely satisfied they could stop front-loading the rate increases and move in smaller steps.

The minutes lifted sentiment, and global investors were seen targeting Japanese shares.

Chip-related heavyweights provided the biggest boost to the Nikkei, with Tokyo Electron and Advantest climbing 3.55% and 4.56%, respectively.

Cyber Agent, which broadcast World Cup soccer games on the internet for free, surged 7.44% after Japan stunned four-times champions Germany in their World Cup opener on Wednesday.

 

China Covid’s Economic Toll

Meanwhile, in China, Covid cases continued to surge, with the economic toll from mobility restrictions and lockdowns piling up.

But China’s cabinet flagged the possibility of an upcoming cut to banks’ reserve requirement ratio (RRR), pledging new stimulus measures to revive its COVID-battered economy.

That boosted China’s bluechips index which rose 0.9% and sparked a jump on Hong Kong’s Hang Seng, which was up 0.78%, or 137.09 points, to 17,660.90.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8% in early trade.

However, the Shanghai Composite Index dipped 0.25%, or 7.60 points, to 3,089.31, while the Shenzhen Composite Index on China’s second exchange advanced 0.13%, or 2.63 points, to 1,998.14.

Elsewhere across the region, South Korean shares were up 0.6% after the Bank of Korea slowed down its pace of tightening. 

Indian stocks rallied with Mumbai’s signature Nifty 50 index up 1.19%, or 216.85 points, to close at 18,484.10.

 

US Jobless Claims Increase

Globally, S&P 500 futures were up 0.2%, while Nasdaq futures rose 0.3%, after modest gains in US stocks.

Minutes of the US Federal Reserve’s last meeting showed a “substantial majority” of Fed policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes.

The futures market implies a 76% chance of a rise of 50 basis points to 4.25%-4.5% at the December meeting, while a majority of investors expect the target US federal funds rate will peak above 5% by next May.

US economic data on Wednesday showed jobless claims increased more than expected last week, while business activity contracted for a fifth month in November.

The US dollar on Thursday failed to recoup overnight 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 major support level from September, which if breached could see oil tumbling to levels not seen before late 2021, adding to the evidence that it’s likely inflation has started coming down.

US crude oil futures eased 0.2% to $77.79 per barrel, after tumbling more than 3% on Wednesday, as the G7 nations considered a price cap on Russian oil above the current market level. Brent crude futures fell 0.15% to $85.26.

In the bond market, long-term US Treasuries rallied overnight after the Fed minutes’ release.

Yields on 10-year notes dropped to a huge 79-basis-points deficit to two-year yields, a curve inversion on a scale not seen since the dot.com bust of 2000 and, on the face of it, a signal investors expect a deep economic downturn in coming months.

US markets are closed for the Thanksgiving holiday on Thursday.

 

Key figures

Tokyo – Nikkei 225 > UP 0.95% at 28,383.09 (close)

Hong Kong – Hang Seng Index > UP 0.78% at 17,660.90 (close)

Shanghai – Composite < DOWN 0.25% at 3,089.31 (close)

London – FTSE 100 > UP 0.21% at 7,481.07 (0940 GMT)

New York – Dow > UP 0.28% at 34,194.06 (Wednesday close)

 

• Reuters with additional editing by Sean O’Meara

 

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