Asian markets track Wall Street rally
After a softer than expected US inflation data spurred speculation that the Federal Reserve could pivot to a shallower pace of interest-rate hikes, Asia stocks are poised to track a Wall Street rally.
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For Australia and Hong Kong, futures rose at least 1%, while Japan is closed for a holiday Thursday that also rules out cash Treasuries trading. The US equity contracts fluctuated after the S&P 500 hit a three-month high and the Nasdaq 100 climbed to more than 20% above a June low.
The dollar has retreated the most since the onset of the pandemic, which has led to the reversal of optimism in the US session. Short-term Treasury yields went down as investors scaled back their expectations of how aggressive the Fed will have to tighten monetary policy.
Crude oil held most of a jump above $91 a barrel whileBitcoin flirted with a break past $24,000 in a sign of the brighter spirits in markets.
US headline inflation was 8.5% in July, down from the 9.1% June advance that was the largest in four decades. That is still high and Fed officials stressed that more rate hikes are coming. They also signaled investors should rethink expectations of cuts next year to shore up economic growth.
Carol Schleif, deputy chief investment officer at BMO Family Office, said on Bloomberg Television that everyone is jumping to that inference that the Fed can relax some. It is important to remember that the Fed wants inflation to be down to 2% of the 2% level. It is too early to be completely risk-on. Minneapolis Fed President Neel Kashkari wants the Fed's benchmark interest rate to be at 3.9% by the end of the year and 4.4% by the end of 2023, according to Minneapolis Fed President Neel Kashkari.
Kashkari said that it was not realistic to conclude that the Fed will start cutting rates early next year, when inflation is very likely to be well over the 2% goal.
Charles Evans, Chicago's counterpart, said inflation remains unacceptably high. He expects that we will be increasing rates the rest of the year and into next year. Christian Hoffmann, portfolio manager at Thornburg Investment Management said that the Fed's easing of financial conditions was annoying and we should not be surprised that Fed speakers continue to try to talk down the market and risk assets.
In China, the central bank pledged to avoid massive stimulus and excessive money printing to spur growth, as well as to protect the economy against inflation threats.
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Some of the biggest moves in markets are:
The offshore yuan was 6.7238 per dollar.
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