Asian stocks rose mainly on Monday, with modest gains on Wall Street as investors became more optimistic that the U.S. Federal Reserve had brought an end to its rate hike cycle.
A series of reports pointing to slowing inflation and a cooling job market have led traders to focus on lower interest rates, with many betting on easier financial conditions in the new year and pulling back into risky assets.
The focus will be on the release later this week of minutes from the Fed’s November policy meeting, where officials took stock of borrowing costs and signaled a possible end to the tightening campaign.
Stephen Innes of SPI Asset Management said: “The Fed will be pleased with the progress in the data, but the minutes will remain in the context of easing financial conditions since the meeting and a more favorable macro environment that supports the soft landing narrative.” It will be scrutinized.”
All three major Wall Street indexes ended modestly higher on Friday, but observers said they expected trading to be thin this week ahead of the Thanksgiving holiday.
In Asia, Hong Kong rose after Friday’s sharp decline, spurred by a 10% plunge in e-commerce giant Alibaba. The market’s leading stocks rose more than 1% on Monday.
Shanghai, Sydney, Seoul, Taipei, Jakarta and Wellington also rose, but Tokyo at one point hit a 33-year high in the morning and fell, while Mumbai, Singapore, Bangkok and Manila also fell into the red.
London started in negative territory, while Paris and Frankfurt both rose.
Fidelity International’s Marty Dropkin warned that this path may not be completely risk-free.
“The risk…is that financial conditions are easing as yields fall and stock prices rise,” he said in a note.
“If this situation persists for too long and the Fed becomes unstable and there is a potential for surprises on the upside to inflation readings, the Fed could reassert its hawkish rhetoric, which could reduce volatility. “That could probably happen next year, and in the short term, year-end stock gains look credible.”
Expectations that interest rates are likely to fall, rather than rise further, weighed on the dollar, which has struggled to recover from last week’s decline.
Oil prices also edged higher, extending Friday’s gains by more than 4% ahead of a meeting with OPEC and other major producers where Russia and Saudi Arabia could extend output cuts.
– Main figures around 0810 GMT –
Tokyo – Nikkei Stock Average: 0.6% lower at 33,388.03 (closing price)
Hong Kong Hang Seng Index: 17,778.07 (closing price), up 1.9%
Shanghai – Overall: up 0.5% to 3,068.32 (close price)
London – FTSE 100: down 0.2% to 7,492.88
Dollar/JPY: down to 148.94 yen from Friday’s 149.64 yen
EUR/USD: rose from $1.0916 to $1.0918
GBP/USD: increased from $1.2465 to $1.2475
EUR/GBP: down from 87.55 pence to 87.52 pence
West Texas Intermediate: up 0.7% to $76.56 per barrel
Brent crude: up 0.7% to $81.16 per barrel
New York – Dow: flat 34,947.28 (closing price)