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Asian stocks rose on Thursday, taking cues from a strong rally on Wall Street after robust economic data and upbeat corporate guidance boosted investor appetite.
The dollar hovered near its highest level this week after Federal Reserve officials continued to stress that policy tightening is far from over. However, treasury yields remained down from two-week highs as investors stayed sidelined ahead of employment data this week that will guide the path of interest rates.
Crude oil prices stabilised after sliding to an almost six-month low overnight as US data showed an unexpected surge in stockpiles.
Japan’s Nikkei rose 0.58%, while Chinese blue chips added 0.55% and Hong Kong’s Hang Seng jumped 1.24%, with an index of its tech stocks surging 2.29%.
MSCI’s broadest index of Asia-Pacific shares gained 0.65%.
US S&P 500 futures were about flat, after the underlying index jumped 1.56% overnight and the tech-heavy Nasdaq surged 2.73% to a three-month peak.
Strong financial results from PayPal lifted the mood, while data showed new orders for US-manufactured goods increased solidly.
Meanwhile, more Fed officials joined the chorus saying more tightening is necessary to rein in inflation.
However, one — San Francisco Fed president Mary Daly — said in an interview with Reuters that a half-point hike may be what’s needed at the next meeting in September, rather than another 75-basis-point rise.
Fed chair Jerome Powell said last week the central bank may consider another “unusually large” rate hike at its September 20-21 gathering.
“The view that we have this pivot away from tightening [by the Fed] has been very heavily hammered over the last 48 hours by pretty much everyone and their dog, saying we are still going to be tightening rates pretty aggressively,” said Rob Carnell, Asia-Pacific head of research at ING in Singapore.
“That message hasn’t properly percolated through to the equity market, which is looking at what has been a reasonably strong set of earnings numbers and some fairly decent economic data and going, ‘this is brilliant’, instead of doing what they should be doing and saying ‘this is quite concerning’.”
Traders now price 58.5% odds of a 50-basis-point increase versus 41.5% probability for the bigger bump, which would see the most aggressive tightening path in more than a generation.
Benchmark long-term US treasury yields held at about 2.71% in Tokyo trading on Thursday. They rose overnight to the highest since July 22 at 2.851% but then got knocked back to end lower following Daly’s comments.
The dollar index, which measures the greenback against six major counterparts, eased 0.11% to 106.36 on Thursday after rising as high as 106.82 in the previous session for the first time in a week.
Against Japan’s currency, which is extremely sensitive to US yields, the dollar retreated 0.24% to ¥133.51, after reaching 134.55 overnight.
The majority of analysts in a Reuters poll say the dollar has yet to peak.
Crude oil rose in early Asian trade, bouncing off the previous day’s multi-month lows following data that signalled weak US fuel demand.
Brent crude futures rose 53 US cents to $97.31 a barrel, while West Texas Intermediate (WTI) crude futures rose 55c to $91.21. Both benchmark fell to their weakest closing levels since February on Wednesday, at $96.50 and $90.66, respectively.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.