(Bloomberg) — Asian stocks rose, following a buoyant session on Wall Street amid bets the Federal Reserve will soon signal it’s ready to start cutting interest rates.
Shares advanced in Japan, South Korea and Australia. The MSCI Asia-Pacific index headed for a third day of gains while Hong Kong futures also pointed to a rise. The advance was fueled by a bullish mood in the US, where the S&P 500 climbed for an eighth straight day — the longest winning streak this year.
In Asia, focus will be on China’s loan prime rate and minutes of the Reserve Bank of Australia’s August policy meeting. Traders will also watch to see if the yen keeps strengthening against the greenback ahead of Bank of Japan Governor Kazuo Ueda’s appearance in parliament Friday, where he’s expected to shed light on the policy outlook.
A bumpy stretch for investors in the dog days of July and August hasn’t tempered their zest for equities, with allocations still robust despite a bout of recent volatility and heightened uncertainty around the economy. Treasury 10-year yields were little changed while a gauge of the dollar was on track for a third day of losses.
“Investors ‘climbed a wall of worry’ as the stock-market relief rally gained momentum,” said Craig Johnson at Piper Sandler. “Equities will likely consolidate ahead of Fed commentary at Jackson Hole this week.”
Meanwhile, with the Fed approaching a crucial pivot point, financial markets will be looking for confirmation from Jerome Powell Friday that the US central bank will lower rates in September. But more drama surrounds what happens after that and the pace of additional cuts over the next several months as the Fed confronts the dual risks to both inflation and employment.
US policymakers are unlikely to “out-dove” the market, but as long as growth is “OK,” equities can withstand a less-dovish central bank, according to Ohsung Kwon at Bank of America Corp.
“Stocks just need a nod that growth is going to be supported,” Kwon said. “While our view is that risk is to the upside, we do not believe that Jackson Hole will spur the large equity moves that it has in the past when the Fed used it as forum to telegraph upcoming policy decisions.”
Stock volume has been trending lower since the trading surge during the early-August selloff as traders are reluctant to place big bets ahead of the Fed’s Jackson Hole economic symposium this week. About 10 billion shares changed hands on exchanges Monday, 14% below the one-month average. S&P 500 futures were little changed early Tuesday.
Equity positioning is back up to moderately overweight, a week after sliding to underweight, according to Deutsche Bank AG strategists including Parag Thatte and Binky Chadha, who said exposure remains well below the mid-July highs at the top of the historical band.
In commodities, oil slipped as the US said Israel had accepted a cease-fire proposal to halt the war in Gaza, potentially easing supply risks just as concerns about the outlook for demand mount.
Key events this week:
- China loan prime rates, Tuesday
- Eurozone CPI, Tuesday
- US Fed minutes, BLS preliminary annual payrolls revision, Wednesday
- Eurozone HCOB PMI, consumer confidence, Thursday
- ECB publishes account of July rate decision, Thursday
- US initial jobless claims, existing home sales, S&P Global PMI, Thursday
- Japan CPI, Friday
- Bank of Japan Governor Kazuo Ueda to attend special session at Japan’s parliament to discuss July 31 rate hike, Friday
- US new home sales, Friday
- Fed Chair Jerome Powell speaks at Jackson Hole symposium in Wyoming, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 8:57 a.m. Tokyo time
- Hang Seng futures rose 0.8%
- S&P/ASX 200 futures rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1086
- The Japanese yen was little changed at 146.70 per dollar
- The offshore yuan was little changed at 7.1302 per dollar
Cryptocurrencies
- Bitcoin rose 0.7% to $59,534.93
- Ether rose 0.8% to $2,637.43
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.87%
- Japan’s 10-year yield advanced 1.5 basis points to 0.885%
- Australia’s 10-year yield advanced two basis points to 3.94%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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