Asian stocks rallied on Thursday with investors buoyed by hopes the US Federal Reserve was poised to ease back on its tightening campaign.
The Fed left rates unchanged in its latest policy announcement on Wednesday, with observers taking Chair Jerome Powell’s measured tone on another interest rate hike as a sign of dovishness.
Japan’s Nikkei share average crossed the key psychological 32,000 mark for the first time in two weeks amid bets US bond yields had peaked too.
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Chip-related shares were among the top gainers on the benchmark index, as growth stocks benefited from the anticipation of lower borrowing costs.
“The whole world has been waiting for the Fed to slow down, to pause, to signal that they’re done,” said Steen Jakobsen, Saxo Bank’s chief investment officer, in an interview in Tokyo.
The Nikkei ended the day up 1.10% at 31,949.89, after hitting 32,087.13 for the first time since October 18 earlier. The broader Topix added 0.51%.
For the week, the Nikkei has gained 3.09%. Japanese markets will be closed for a public holiday on Friday.
Mainland China stocks edged back, while Hong Kong shares rose, tracking global markets on bets that US interest rates cuts are on the way.
The blue-chip CSI 300 Index fell 0.47% while the Shanghai Composite Index lost 0.45%, or 13.67 points, to 3,009.41. The Shenzhen Composite Index on China’s second exchange dropped 1.00%, or 18.77 points, to 1,853.38.
Hong Kong’s Hang Seng Index added 0.75%, or 128.81 points, to close at 17,230.59. The Hang Seng China Enterprises Index climbed 0.88%.
Elsewhere across the region, in earlier trade, Sydney, Singapore, Seoul, Mumbai, Taipei, Jakarta and Wellington were all sharply higher. MSCI’s broadest index of Asia-Pacific shares outside Japan surged 1.6%, the biggest daily jump since late July.
Apple Results Forecast
Europe was also set for a positive open, with Eurostoxx 50 futures up 0.7% and FTSE futures rising 0.5%. The Bank of England will meet later in the day, and markets suspect that its tightening cycle is also done and dusted. S&P 500 futures rose 0.3% and Nasdaq futures advanced 0.4%.
Investors are now awaiting the results from Apple, a bellwether for consumer demand and the tech sector. The Cupertino California-based company is expected to report a 1% decrease in quarterly revenue later in the day.
Overnight, the Fed held the policy rate steady in its current 5.25%-5.50% range. While Chair Jerome Powell did not rule out another hike, markets judged he was not quite as hawkish as he might have been.
Fed funds futures rallied as markets pared back the risk of a December hike to about 20% and a January move to 25%. Markets have priced in a 70% chance that the tightening is over and rate cuts could amount to 85 basis points next year, beginning as soon as June.
The benchmark 10-year Treasury yield eased another 1 basis point to 4.7196%, the lowest in more than two weeks. Overnight, it tumbled 14 basis points, the biggest daily drop since March, also thanks to a Treasury announcement that the government will slow increases in the size of its longer-dated auctions.
US Payrolls Data
The next big focal point for the market is non-farm payrolls data on Friday, which analysts expect to show the economy added 180,000 jobs in October, slowing from 336,000 increase the previous month.
It will come after mixed data showed strong job openings and slower than expected growth in private payrolls.
For currencies, the retreat in Treasury yields pulled down the US dollar modestly, while the improvement in risk sentiment gave a lift to the battered Aussie and kiwi dollars, which rose 0.5% and 0.7%, respectively, to multi-week tops.
The yen continued to regain ground, up 0.3% to 150.42 per dollar. It had hit a one-year low after a Bank of Japan decision to ease its control over the 1% cap on 10-year yields, with the tweak seen insufficient to close the wide interest rate gaps between Japan and other countries.
Oil prices traded higher. Brent crude futures climbed 1.0% to $85.50 a barrel while US West Texas Intermediate futures were at $81.32 a barrel, up 1.1%.
The price of gold was 0.2% higher at $1,985.99 per ounce.
Key figures
Tokyo – Nikkei 225 > UP 1.10% at 31,949.89 (close)
Hong Kong – Hang Seng Index > UP 0.75% at 17,230.59 (close)
Shanghai – Composite < DOWN 0.45% at 3,009.41 (close)
London – FTSE 100 > UP 1.29% at 7,437.06 (0934 GMT)
New York – Dow > UP 0.67% at 33,274.58 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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