(Bloomberg) — Stocks in Asia rose Wednesday after a tech rally lifted Wall Street and bets on Federal Reserve rate cuts stabilized.
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Shares in Australia and Japan rose, as did stock futures in Hong Kong, after sharp falls on Tuesday. U.S. stock futures fell after the S&P 500 rose 1% and the tech-heavy Nasdaq 100 rose 1.6% on Tuesday. Chipmakers were among the market leaders, with Nvidia Corp. a five-day rally extended to 14%.
The Chinese stock market continued to take center stage. An index of US-listed Chinese stocks fell 6.9% overnight as concerns grew that the latest wave of stimulus could be insufficient to convince investors of a sustained rally in the country’s stock market. A news report quoting Premier Li Qiang late Tuesday indicated that China must implement policies to stabilize growth and expectations, a sign that Beijing is trying to build confidence among investors.
Treasuries were little changed after holding steady on Tuesday following a series of selling over the previous four sessions, boosted by last week’s US jobs data that weighed on interest rate cut expectations. U.S. 10-year yields fell one basis point to just above 4%, while front-end yields fell by a sharper margin as investors analyzed comments from Federal Reserve officials.
Fed Bank of Boston President Susan Collins noted that rate cuts should be cautious and data-based. Her colleague Raphael Bostic from Atlanta said that while risks to inflation have declined, threats to the labor market have increased even as the economy remains strong. Governor Adriana Kugler said officials must continue to focus on reducing inflation, with a “balanced approach” that avoids a slowdown in employment.
“The US data is not so strong that the Federal Reserve’s contribution to the global rate-cutting cycle appears to be coming to an end,” said Mark Haefele of UBS Global Wealth Management. “We remain convinced that investors should position themselves for lower interest rates.”
Oil clawed back some gains early Wednesday after losing more than 4% on Tuesday, driven by concerns about a slowdown in demand from China as Beijing failed to launch more major stimulus measures.
In Asia, New Zealand and India will each make interest rate decisions, while the data released includes inflation in Taiwan and machine tool orders in Japan. South Korea will join the FTSE Russell bond index, capping months of official campaigning and an overhaul of financial markets infrastructure. The index provider also added India to its emerging market debt gauge, according to a statement on Tuesday.
Gains for U.S. stocks brought benchmarks within striking distance of their record highs as investors began preparing for the next round of corporate earnings. The S&P 500 topped 5,750.
Honeywell International Inc. benefited from plans to spin off its advanced materials division. Roblox Corp. fell as Hindenburg Research said it was betting against the gaming platform.
Guessing game
Mohamed El-Erian said the gambling game unfolding over the Fed’s monetary policy is creating market volatility.
“There are markets everywhere. In the past fifteen days, the probability of a 50 basis point cut in November has risen from over 60% to zero. November is next month,” El-Erian, the president of Queens’ College, Cambridge, told Bloomberg Television on Tuesday.
“That’s how much uncertainty there has been in this market. These are huge moves based on data points,” he added.
Billionaire investor Ray Dalio said he doesn’t expect the Fed to make “significant interest rate cuts,” and that bonds are a risky investment given recent swings in Treasury markets.
“Treasuries haven’t been a great investment,” the founder of Bridgewater Associates said Tuesday at the Greenwich Economic Forum. “We run an interest rate risk on that bond market.”
Yields have risen after a healthy decline and for now this suggests the bond market is pricing in fewer rate cuts and not more, said Michael Landsberg of Landsberg Bennett Private Wealth Management.
“Yields are likely to remain in a range and even if they rise from here, they still have plenty of upside before rising rates start to negatively impact stock prices,” he said.
Main events this week:
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Fed minutes, Wednesday
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The Fed’s Lorie Logan, Raphael Bostic, Austan Goolsbee and Mary Daly will speak Wednesday
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US CPI, initial unemployment claims, Thursday
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John Williams and Thomas Barkin of the Fed will speak on Thursday
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JPMorgan and Wells Fargo kick off earnings season for the major Wall Street banks on Friday
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U.S. PPI, University of Michigan Consumer Confidence, Friday
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The Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman will speak Friday
Some of the major moves in the markets:
Stocks
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S&P 500 futures fell as of 8:05 a.m. Tokyo time
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Hang Seng futures rose 0.9%
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Australia’s S&P/ASX 200 rose 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0978
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The Japanese yen was little changed at 148.26 per dollar
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The offshore yuan was little changed at 7.0717 per dollar
Cryptocurrencies
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Bitcoin fell 0.4% to $62,080.67
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Ether fell 0.3% to $2,435.78
Bonds
Raw materials
This story was produced with the help of Bloomberg Automation.
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