Asian shares climb as US sentiment rises to record: Markets close

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(Bloomberg) — Asian shares rose on Thursday after their U.S. peers set a new high ahead of inflation data that could define the Federal Reserve’s easing of policy in coming months.

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Shares in Japan, South Korea, Australia and China advanced. The gains for shares in Hong Kong and mainland China followed the release of details for a People’s Bank of China liquidity facility that institutional investors can use to buy shares, a move initially disclosed last month. Gains in China extended volatile trading that included the biggest decline in more than four years for a benchmark mainland share on Wednesday.

Treasuries were flat in Asian trading after yields rose in New York on Wednesday. The Bloomberg Dollar Spot Index was little changed after rising for the previous eight sessions. The yen was flat against the greenback after falling to its lowest level since mid-August at around 149 per dollar on Wednesday. South Korean bond futures rose on news of its inclusion in the FTSE Russell World Government Bond Index.

There were few signs of further support for China’s economy and financial markets, pointing to further volatility for the nation’s stocks. A gauge of volatility for Hong Kong stocks was slightly lower on Wednesday but remained well above historical averages. A sticking point for investors is whether there will be more tax incentives. Authorities said Wednesday that a press conference on the matter would be held over the weekend.

“There’s certainly a lot of optimism and hope in that meeting” about fiscal clarity, Yuting Shao, macro strategist for State Street Global Markets, told Bloomberg Television. Broader themes of lower US borrowing costs and official support for China’s economy will act as tailwinds for risk sentiment, she added. “Any clarity from China will add another layer on top.”

The stakes are high for China’s Finance Ministry to convince the market that its reflation pivot is back more firmly at its press conference on Saturday, according to Morgan Stanley.

Elsewhere in Asia, Taiwan Semiconductor Manufacturing Co. posted a better-than-expected 39% rise in quarterly revenue on Wednesday. Markets are closed in Taiwan on Thursday.

Back in the US, the S&P 500 rose 0.7% to a record high on Wednesday, its 44th of the year, as tech stocks once again propelled gains. Apple Inc. it went up by 1.7%. Nvidia Corp. halted a five-day rally as Tesla Inc. went down before the release of Robotaxi. Alphabet Inc. fell 1.5 percent on news that the U.S. is weighing a Google breakup in a historic big tech antitrust case.

Gains for technology reflected earlier weakness that represented an attractive buying opportunity, according to Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “We remain positive about the technology sector as well as the outlook for artificial intelligence,” she said. “We believe volatility should be used to build long-term exposure to AI.”

US consumer price data due later Thursday is expected to show inflation will moderate further, supporting anticipated Fed easing in the coming months. Despite this, market prices indicate that the likelihood of another 50 basis point rate cut is almost off the table after last week’s strong jobs report.

Markets barely budged on Wednesday after minutes from the Fed’s most recent meeting showed that Jerome Powell received some pushback on a half-point rate cut in September, as some officials favored a smaller cut.

“Policymakers agree that inflation is fading and see potential weakness in job growth,” said TradeStation’s David Russell. “That keeps rate cuts on the table if necessary. The bottom line is that Powell could have the back of the market heading into the end of the year.”

Inflation data

The consumer price index is seen rising 0.1 percent in September, the smallest gain in three months. Compared with a year earlier, the CPI likely rose 2.3%, the sixth straight slowdown and the weakest since the start of 2021. The gauge that excludes volatile food and energy categories, which gives a better picture of inflation by basis, it is expected to increase by 0.2% a month earlier and 3.2% from September 2023.

“The Fed’s decision to shift its focus from inflation to the labor market means that inflation data, including tomorrow’s CPI, will likely become less of a market mover than they have been,” said Matthew Weller at Forex.com and City Index .

“Despite this logical observation, this month’s CPI report could still drive market volatility, based on Friday’s jobs report, a reading that suggests the potential for upside risks to inflation,” he added .

Meanwhile, Fed Bank of San Francisco President Mary Daly said she expects the US central bank to continue cutting interest rates this year in an effort to protect the labor market. “I think two more cuts this year, or one more cut this year, really stretches the range of what’s likely,” Daly said Wednesday, referring to cuts of one or two quarter points.

In commodities, oil rose as US crude inventories rose and traders monitored China’s plans for fiscal policy. Gold was little changed on Thursday after falling in the past six sessions.

Key events this week:

US CPI, Initial Jobless Claims, Thursday
The Fed’s John Williams and Thomas Barkin speak Thursday
JPMorgan, Wells Fargo kick off earnings season for big Wall Street banks on Friday
US PPI, University of Michigan, Consumer Sentiment, Friday
The Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak on Friday

Some of the main movements in the markets:

Stocks