Asian stocks extended a rally on Wednesday following the best two-day run for US equities in more than two years, as investors begin to anticipate a slowing to central bank tightening that could jolt risk assets higher.
(Bloomberg) — Asian stocks extended a rally on Wednesday following the best two-day run for US equities in more than two years, as investors begin to anticipate a slowing to central bank tightening that could jolt risk assets higher.
Hong Kong stocks jumped after a one-day break and Australian, Japanese and South Korean shares rose as improving risk sentiment drags global equities from oversold levels. US and European stock futures inched lower after the S&P 500 jumped 3.1% Tuesday and the Euro Stoxx 50 enjoyed its best day since March. Elon Musk revived his $44 billion bid for Twitter Inc., which soared 22%.
A decline in US job openings provided evidence the labor market may be cooling, offering hope the Federal Reserve may soon slow its rate-hiking path. Policy makers in Australia gave that view a boost on Tuesday by delivering a smaller-than-expected rate rise, though that move wasn’t repeated Wednesday in New Zealand, where the central bank pushed its benchmark lending rate to the highest in seven years, as expected.
A Fed official speaking on Tuesday indicated further tightening ahead for the US central bank, dousing hopes that peak interest rates may be near.
“I don’t think we’re out of the woods yet,” said Erin Gibbs, senior partner and chief investment officer of Main Street Asset Management, about the outlook for risk assets in an interview on Bloomberg TV. “I still think we could see some downward motion here.”
“There are a lot more bonds for sale,” Gibbs said. “That pushes prices down and yields up. That would make bonds more attractive than equities and put more and more headwinds on equities.”
A Bloomberg index of the dollar steadied after falling 3% from a peak last week. The pound inched lower after climbing on Tuesday to the highest level in two weeks. The price of oil traded flat after jumping on Tuesday as OPEC+ said it was considering an output cut of as much as 2 million barrels a day, double prior estimates.
Investors will be keenly focused on Friday’s US jobs data that economists anticipate is set to show a slowing in new jobs added.
“For the market to continue higher, the jobs data will have to be in-line with, or short of expectations,” said Lindsey Bell, chief markets and money strategist at Ally. The market is currently anticipating a “goldilocks” labor-market report that’s “not too hot and not too cold.”
Key events this week:
- Eurozone services PMIs, Wednesday
- OPEC+ meeting begins, Wednesday
- Fed’s Raphael Bostic speaks, Wednesday
- The Reserve Bank of New Zealand meets, Wednesday
- Eurozone retail sales, Thursday
- US initial jobless claims, Thursday
- Fed’s Charles Evans, Lisa Cook, Loretta Mester speak at events, Thursday
- US unemployment, wholesale inventories, nonfarm payrolls, Friday
- BOE Deputy Governor Dave Ramsden speaks at event, Friday
- Fed’s John Williams speaks at event, Friday
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Some of the main moves in markets:
Stocks
- The S&P 500 futures fell 0.4% as of 10.35 a.m. in Tokyo. The S&P 500 added 3.1%
- Nasdaq 100 futures fell 0.5%. The Nasdaq 100 gained 3.1%
- Japan’s Topix climbed 0.4%
- Australia’s S&P/ASX 200 added 1.5%
- Hong Kong’s Hang Seng index jumped 3.9%
- South Korea’s Kospi index added 0.3%
- Euro Stoxx 50 futures fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index traded flat
- The Japanese yen climbed 0.2% to 143.88 per dollar
- The offshore yuan traded flat at 7.0445 per dollar
- The euro was flat at $0.9978
Cryptocurrencies
- Bitcoin fell 0.5% to $20,232.45
- Ether rose 0.5% to $1,354.77
Bonds
- The yield on 10-year Treasuries fell one basis point to 3.62%
- Australia’s 10-year yield fell seven basis points to 3.66%
- Britain’s 10-year yield declined nine basis points to 3.87%
Commodities
- West Texas Intermediate crude traded at $86.31 a barrel
- Gold futures fell slightly to $1,720.42 an ounce
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