Asian markets cautious on China, european stocks set to rally

Asian markets cautious on China, european stocks set to rally

SYDNEY Asian shares were mixed on Wednesday, with investors cautious on China amid the ongoing Party Congress, while European markets are poised to extend the optimism on earnings ahead of British inflation readings.

MSCI's broadest index of Asia-Pacific shares outside Japan reversed earlier gains to be 0.5 per cent lower, boosted by a 1.2 per cent drop in Chinese blue chips and a 1.4 per cent fall in Hong Kong's Hang Seng index.

Japan's Nikkei rose 0.5 per cent, while Australia's resources-heavy shares rose 0.3 per cent, tracking Wall Street higher.

The S&P 500 futures rose 0.7 per cent and Nasdaq futures jumped 1.0 per cent. Netflix Inc reversed customer losses that had hammered its stock this year and projected more growth ahead, sending its shares 14 per cent higher in after-hours trading.

The results from Lockheed Martin, Johnson Johnson and Goldman Sachs Group Inc. helped the U.S. stocks rally. The Dow Jones and the S&P 500 gained 1 per cent.

The shares have managed to find technical support in recent days and could bounce further the near-term downside risks for shares remain high, said Shane Oliver, chief economist at AMP Capital.

Chris Turner, global head of markets at ING, said that the dollar correction could be extended a bit after a quiet week for the U.S. data.

The core view of the Fed, but the other central banks, hiking into a looming recession, should mean that the core dollar bull trend remains intact. The U.S. dollar was up 0.2 per cent against a basket of major currencies on Wednesday. It hit another fresh 32 year high of 149.34 yen overnight before stabilising at 149.28 amid the risk of intervention from the Japanese authorities.

The pound gained 0.12 per cent against the dollar to trade at $1.1333 after easing slightly in the previous session.

The UK, roiled by a historic crisis in the government bond market, will report inflation readings for September later in the day, with annual inflation likely to run at a double-digit rate of 10 per cent last month.

That would likely pressure the Bank of England to hike more aggressively. The BoE said on Tuesday it would start selling some of its huge stock of British government bonds from Nov. 1, but would not sell any longer-duration gilts this year.

Ray Attrill, head of FX strategy at National Australia Bank, said that the Bank of England will make a key data point of reference on today's September UK inflation data, due to the fluctuating views market price on 2 November.

Markets revise the expected tightening pace for the Reserve Bank of New Zealand after a strong inflation report from New Zealand on Tuesday.

Oil prices recovered some ground on Wednesday after plunging more than 3 per cent in the previous session on fears of higher U.S. supply and the economic slowdown in China.

Brent crude futures rose 0.4 per cent to $90.39 per barrel, while the U.S. West Texas Intermediate WTI crude jumped 0.9 per cent to $83.58 per barrel.

A senior administration official said that U.S. President Joe Biden will announce a plan to sell off the last portion of his release from the nation's emergency oil reserve by year's end, and detail a strategy to refill the stockpile when prices drop.

On Wednesday, the U.S. Treasury yields went up a bit after edging lower.

The yield on benchmark 10 year notes went up 3 basis points to 4.0317 per cent, while the yield on two-year notes rose to 4.4543 per cent, compared to the previous close of 4.4370 per cent.

Gold was slightly lower. 81 per ounce.