Hang Seng, Nikkei Rally on US Inflation Hopes, China Data

Asian stocks staged a fightback on Friday with investor mood lifted by positive signs on US inflation and encouraging industrial data out of China.

Shares across the region also tracked Wall Street futures higher as Amazon provided some welcome earnings relief, while bonds were able to sustain a rally amid signs US price rises were easing.

Japan’s Nikkei share average recovered after suffering its worst drop in three weeks in the previous session, with chip-related stocks leading the recovery.

Also on AF: Huawei, US-Sanctioned Firms Win as China Dumps Western Tech

The Nikkei rose 1.27% to close at 30,991.69, after losing 2.14% in the previous session. The broader Topix ended 1.37% higher at 2,254.65. For the week, however, the Nikkei lost 0.86%, while the Topix edged down 0.04%.

Chip-testing equipment maker Advantest rose 0.93% after a 7% decline in the previous session, providing the biggest boost to the Nikkei.

Chinese stocks rose and were on track for a fourth session of advances, after data showed profits at industrial firms extended gains in September, while policy measures also helped sentiment.

Meanwhile, more than 30 Chinese listed companies vowed to buy back shares or increase stakes in their firms late on Thursday. Firms have spent more than 10 billion yuan ($1.37 billion) in buybacks so far in October, state media Securities Times reported.

The blue-chip CSI 300 Index gained 1.37% and the Shanghai Composite Index added 0.99%, or 29.48 points, to 3,017.78. The Shenzhen Composite Index on China’s second exchange advanced 1.82%, or 33.21 points, to 1,858.61.

Mainland property developers listed in Hong Kong surged 2.8%, and tech giants rose 1.8%. The benchmark Hang Seng Index gained 2.08%, or 354.12 points, to close at 17,398.73 and the Hang Seng China Enterprises Index climbed 2.04%.

Elsewhere across the region, in earlier trade, Mumbai, Sydney, Seoul, Jakarta and Taipei were all well up.

MSCI’s broadest index of Asia-Pacific shares outside Japan bounced 0.9% after hitting a fresh 11-month low a day ago. It is, however, on track for a weekly loss of 0.8%, weighed down by high bond yields and the conflict in the Middle East.

US Economy Resilient

Europe was set for a stronger open, with Eurostoxx 50 futures rising 0.3% and FTSE futures up 0.2%. The European Central Bank held rates unchanged overnight, giving markets some comfort at a time of geopolitical turmoil.

S&P 500 futures gained 0.6% while Nasdaq futures rallied 0.9%, driven by a 5% jump in Amazon shares in after-hours trading. In a statement after the US close, the tech giant predicted higher holiday season sales and a stabilisation in its cloud business.

There are growing concerns the Israel-Hamas conflict could spread more widely in the Middle East, leading oil prices to jump more than $1 a barrel on Friday.

US data overnight confirmed a resilient economy with inflation easing, feeding soft landing hopes. The US economy grew almost 5% in the third quarter, while underlying inflation subsided considerably during the quarter.

That fuelled hopes the closely watched US personal consumption expenditures (PCE) for September, the Fed’s preferred gauge of inflation, are likely to surprise on the downside as well when released later on Friday.

The CME FedWatch Tool showed that any probability for a rate hike in November has been wiped out and traders trimmed bets for a December hike to 19.5%, compared with 29.3% a day earlier. Rate cuts next year are seen at about 70 basis points.

The benchmark yield on 10-year Treasury notes was flat at 4.8558% after easing 10 basis points overnight. It breached 5% on Monday for the first time in 16 years, lifting borrowing costs around the globe.

Yen Under Pressure

The recent spike in yields have kept the dollar buoyant, especially against the Japanese yen.

The yen hit a fresh one-year low of 150.77 per dollar overnight and was last at 150.17. It was not far off the three-decade low of 151.94 it touched in October last year that led Japanese authorities to intervene in the currency market.

Speculation that the Bank of Japan could raise an existing yield cap at its meeting next week is also keeping traders on edge.

Gold prices were 0.1% higher at $1,987.49 per ounce, not far off a two-and-a-half month high of $1,997.09 hit earlier this month.

Oil prices regained ground after tumbling more than $2 a barrel in the previous session. They are, however, set for the first weekly drop in three weeks.

Brent crude futures climbed 1.5% to $89.26 a barrel while US West Texas Intermediate futures were at $84.52 a barrel, up 1.6%.

Key figures

Tokyo – Nikkei 225 > UP 1.27% at 30,991.69 (close)

Hong Kong – Hang Seng Index > UP 2.08% at 17,398.73 (close)

Shanghai – Composite > UP 0.99% at 3,017.78 (close)

London – FTSE 100 > UP 0.34% at 7,379.68 (0934 BST)

New York – Dow < DOWN 0.76% at 32,784.30 (Thursday close)

• Reuters with additional editing by Sean O’Meara

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