(Bloomberg) – Asian stocks extended a remarkable rally that saw US stocks rebound after losses caused by hot inflation. The dollar fell against most of its currencies.
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An index of regional equities posted its biggest gain in seven months, led by as much as 5% gains in Hong Kong-listed technology companies. Futures on US and European shares also edged higher in the face of consumer price data reinforcing bets for the Federal Reserve to deliver another big interest rate hike in November.
The yen continued to fall in Asia after falling to its lowest level in more than 30 years after the US CPI, only to reverse the move in an abrupt trade. Treasuries were volatile after policy-sensitive two-year yields spiked 17 basis points on Thursday.
With the pressure of higher interest rates piling up on the already struggling global economy, the latest moves underscore the difficulties traders face in volatile markets. Speculation that the year-long stock sell-off has bottomed is seen as one of the potential reasons for the rally. Others include short, less horrendous earnings reports and solid positioning that includes fully-provided hedging.
The technical level counts towards the return time. At one point, the benchmark S&P 500 index recovered 50% of its post-pandemic gains, triggering programmatic buying. A wave of put options bought to protect against such a trend has moved into the money and, as profits have been booked, have prompted traders to buy shares to keep the market neutral.
The cryptocurrency also got a boost from an improved risk appetite across global markets, lifting Bitcoin to a one-week high and sending the largest token to the top of a retest of $20,000. .
“I expect inflation to drop significantly year-on-year by the middle of next year,” said David Chao, global market strategist at Invesco. “Normally that creates a nice backdrop for stocks and credit, but there is likely to be more downside between now and then.”
Market bets on rates remain tilted for consecutive 75bp hikes in the next two Fed meetings and expect the central bank to push rates past 4.85% before the tightening cycle. end.
Investors will have a chance to hear more from the Fed on Friday, with Esther George, Lisa Cook and Christopher Waller expected to speak later in the day.
Inflation figures in China proved to be relatively lower, as rising food prices counteracted the impact of the shutdowns that have gripped economic activity. Traders are looking to China’s twice-decade-long Party Congress to find policies to help revive the country’s economy and markets.
According to Isaac Poole, chief investment officer at Oreana Financial Services, one of the biggest challenges for investors in Asia is the continued strength of the dollar. “The inflation situation makes it more likely that global reserves will still increase in the near term,” he said. “It’s not the time to add a lot of risk, but it’s also not the time to go back to risk massively.”
Sterling steady on Friday in Asian trade as investors worry about more turmoil in UK markets, with Bank of England emergency bond buying on final day .
Elsewhere, both oil and gold posted weekly losses as signs of a global recession and tighter monetary policy threaten energy consumption. The International Energy Agency earlier warned that production cuts agreed by OPEC+ risked a spike in oil prices and pushed the global economy into recession.
This week’s main events:
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Earnings on Friday: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, UnitedHealth Group Inc., US Bancorp, Wells Fargo & Co.
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US Retail Sales, Business Inventory, University of Michigan Consumer Sentiment, Friday
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BOE emergency bond purchase ends on Friday
Some key moves in the market:
Inventory
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S&P 500 futures were up 0.5% at 7:22 a.m. London time. S&P 500 up 2.6% on Thursday
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Nasdaq 100 futures rose 0.5%. Nasdaq 100 rose 2.3%
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Japan’s Topix index up 2.4%
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South Korea’s Kospi rose 2.3%
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Hong Kong’s Hang Seng Index up 2.5%
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China’s Shanghai Composite Index rose 1.9%
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Australia’s S&P/ASX 200 up 1.8%
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Euro Stoxx 50 futures contracts up 1.6%
Currency
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Bloomberg Dollar Spot Index was little changed
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The euro rose 0.1% to $0.9787
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The Japanese Yen fell 0.2% to $147.48/USD
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The offshore yuan was little changed at 7.1760 per dollar
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British Pound was little changed at $1.1315
Bonds
Electronic money
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Bitcoin up 2.2% to $19,804.97
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Ether up 2.6% to $1,326.97
Goods
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West Texas Intermediate crude rose 0.3% to $89.42 per barrel
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Spot gold rose 0.3% to $1,670.59 an ounce
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