Economy

Stocksak: Asian shares rise as rate hike slowdown is hoped for

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© Stocksak. FILE PHOTO – Passersby are silhouetted in front of an electronic stock quotation board outside a Tokyo brokerage, Japan October 18, 2022 REUTERS/Issei Kano

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By Ankur Banerjee

SINGAPORE, (Stocksak), Wednesday: Asian shares edged higher as investors held on to the hope that the pace for U.S. and international rate hikes will slow. U.S. futures declined after disappointing results by tech giants Alphabet(NASDAQ:) and Microsoft(NASDAQ:).

E-mini futures fell 1% in early trading after Alphabet, Google-owner, posted softer-than expected ad sales following the bell. Microsoft missed revenue forecasts and this could be a sign of a slowdown in U.S. economic growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1% in the meantime, led by a rebound in Hong Kong. It was 1.1% higher by mid-morning.

The benchmark index of mainland China advanced 1% while Hong Kong stocks rose 2.2%. This was in an attempt to rebound after Monday’s sharp sell-off in Chinese assets caused by concerns about Beijing’s policies.

Xi Jinping’s newly elected leadership team has raised concerns about the possibility that a more powerful Party leadership would increasingly prioritize the state at all costs to the private sector, and will continue to enforce tough zero-COVID policies into the next year.

U.S. economic data Tuesday showed a slowing in home price growth and a decline in consumer confidence. There are also signs that the Federal Reserve’s aggressive interest-rate hikes are beginning to cool the labour markets.

“Continuing the theme of bad (economic) news is good news (for risk markets), U.S. equities are continuing to bask in the afterglow of last Friday’s hints of a step-down in the pace of Fed tightening,” Ray Attrill, head of FX strategy at National Australia Bank (OTC:) in Sydney, said in a note.

Economists as well as traders expect another 75 basis point (bps), increase from the Fed on Wednesday. However, the outlook is growing for a slowing down to half a percent in December.

Treasuries rose sharply overnight, with yields on U.S. government benchmark 10-year debt down more that 12 bps. It was stable at 4.0937% Wednesday. [US/]

As home building and gas costs soared, inflation in Australia jumped to a 32 year high. The shock added pressure to the central bank to reverse its recent dovish turn. However, markets doubt that there will be a dramatic change.

Support for the dollar was weak and fleeting, with it remaining steady at $0.6386. Three-year Australian government bonds futures fell from peaks, but managed to stay steady at 96.400. [AUD/]

The dollar fell to a three-week low against major currencies, while sterling held close to the six week high reached on Tuesday, after Rishi Sunak, the new British Prime Minister, pledged to steer the country out of economic crisis.

The pound was trading at $1.1445 as of last night, down 0.19% from the previous day but still close to Tuesday’s high of $1.1500 (a level last seen on September 15).

The Japanese yen lost 0.30% to the greenback at 148.39 dollars. The currency, which had fallen to 151.94 for the first time in 32 years, retreated following two rounds of intervention by the Bank of Japan.

Japanese government bonds rallied after the Bank of Japan announced that it would increase bond purchasing operations. [JP/]

Oil prices fell because industry data showed that oil stocks rose more than expected, reinforcing concerns of a global downturn that would reduce demand.

December futures fell $1.17 or 1.3% to $92.35 a bar at 0111 GMT. This was after rising 26 cents in their previous session. U.S. West Texas Intermediate oil futures for December delivery were at $84.44 a bar, down 88cs (or 1%).

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Stocksak Editorial

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