Stocks, Bonds Rise on Hopes Fed Tightening Is Over: Markets Wrap

2023-11-02 08:20

Shares in Asia primed for a rally following gains in US stocks and bonds as the Federal Reserve

Stocks, Bonds Rise on Hopes Fed Tightening Is Over: Markets Wrap

Shares in Asia primed for a rally following gains in US stocks and bonds as the Federal Reserve held interest rates unchanged, bolstering hopes the rate-hiking cycle may be over.

Australian shares opened strongly and equity futures for Japanese and Hong Kong benchmarks both rose, echoing a 1.1% rally in the S&P 500 on Wednesday. The advance placed the US index on track for its best week since March while the tech-heavy Nasdaq 100 benchmark rallied 1.8%. US equity futures edged higher in early Asian trading.

Australian and New Zealand yields fell, mirroring a Wednesday decline in Treasury yields. The 10-year benchmark shed 20 basis points in a move initially triggered by the Treasury’s plans to slow the pace of increases in its long-term debt sales. The Treasury said it will sell $112 billion of long-term securities at its quarterly refunding auctions next week, slightly less than major dealers expected.

Lower Treasury yields weighed on the greenback, which weakened against major currencies, and helped buttress the yen. The Japanese currency strengthened early Thursday extending gains from Wednesday.

Fed Chair Jerome Powell left the door open for further hikes in the central bank’s Wednesday decision, but noted that financial conditions have “tightened significantly in recent months driven by higher, longer—term bond yields, among other factors”.

“We don’t expect any further hikes this cycle,” said James Knightley, chief international economist for ING Financial Markets LLC. “Higher household and corporate borrowing costs are starting to bite.”

US jobs data painted a mixed picture. There were more job openings than forecast, according to the latest JOLTS data, while ADP’s private payrolls figures showed fewer new roles than anticipated. Initial jobless claims figures will be released later Thursday.

Elsewhere, the Bank of England is expected to hold rates for a second consecutive meeting Thursday, as inflation concerns ease.

In Asia, South Korea’s inflation unexpectedly accelerated in October, reinforcing the case for the central bank to keep its restrictive policy in place for longer. Other economic releases Thursday include a monetary policy decision in Malaysia and PMI data for Singapore. Investors will also be keeping an eye on earnings releases from Tata Motors Ltd and Adani Enterprises Ltd.

Other companies due to release results include Eli Lilly & Co and Novo Nordisk, while Apple Inc will deliver its latest earnings later on Thursday in the US. Corporate highlights Wednesday included Qualcomm Inc. providing a better-than-expected revenue forecast for the current quarter while Airbnb Inc. gave a disappointing outlook for the fourth quarter

West Texas Intermediate, the US oil benchmark, advanced early Thursday to around $81 per barrel, partly retracing a Wednesday decline. Gold was steady and bitcoin traded largely unchanged at around $35,500.

Key events this week:

Eurozone S&P Global Eurozone Manufacturing PMI, Thursday
Bank of England interest rate decision. Governor Andrew Bailey holds news conference, Thursday
US factory orders, initial jobless claims, productivity, Thursday
Apple earnings, Thursday
China Caixin services PMI, Friday
Eurozone unemployment, Friday
US unemployment, nonfarm payrolls, Friday
Canada employment report, Friday

Here are some of the major moves in markets:

Stocks