Asian stocks rise with treasuries on rate-cut bets: Markets wrap

Stocks in Asia rose along with Treasuries as traders shrugged off warnings from policymakers seeking to rein in expectations for US interest-rate cuts.

Benchmarks in Hong Kong, South Korea and Australia advanced following a rally on Wall Street on Tuesday, while gauges in China edged lower. Treasury 10-year yields slipped two basis points to 3.91%.

Atlanta Fed President Raphael Bostic said there was no urgency to lower rates but this did little to dent market expectations. Speculation of Fed easing is making investors the most optimistic since the beginning of 2022, a Bank of America Corp. survey showed Tuesday. Traders have also been liquidating bets on higher short-term US yields as investors reel back from the urge to fight the dovish pivot.

Japan’s benchmark government bond yield fell to the lowest since August and the Nikkei 225 stock gauge was on course to close at a 33-year high after the central bank kept investors in the dark on when it may adjust policy.

“A softer USD, softer European yields and a sweet rally on Wall Street overnight to reference off set the stage for a sweet start,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank in Singapore. “A softer JPY on the back of BOJ pushback firing up Nikkei was also sweet for equity bulls in Asia to mark off the rallies in US.”

The BOJ’s decision to stay on hold is likely to support Japanese stocks in the near term, but there may be a correction during the January to March period due to risks such as a deterioration in earnings, Citigroup Inc. analysts including Ryota Sakagami wrote in a note.

Japan’s exports slipped for the first time in three months in November, in a fresh sign that the economic recovery is sputtering. The yen headed for a fourth day of declines in the longest run of losses since mid-November.

Expectations for policy changes have eased, after having been factored in to some extent since the start of December, JPMorgan Chase & Co. chief Japan equity strategist Rie Nishihara wrote in a note. The bank is maintaining its overweight stance on domestic demand and financial stocks on expectations that Japan will exit a deflationary environment and interest rates will increase.

Meanwhile, Chinese banks held their benchmark lending rates on Wednesday, following the central bank’s decision to skip cutting policy interest rates earlier this month.

Richmond Federal Reserve President Thomas Barkin reinforced the more dovish tone, suggesting the US central bank would lower interest rates if recent progress on inflation continued. However, other policymakers have pushed back more aggressively against rate cut bets. Chicago Fed President Austan Goolsbee and the Cleveland Fed’s Loretta Mester suggested Monday that the expectations were premature.

Investors are waiting for data readouts from the US, including Wednesday’s existing home sales, Thursday’s third quarter gross domestic product print and Friday’s durable goods orders and personal consumption expenditures — the Fed’s preferred measure of inflation — to firm up their rate bets.

Data on Tuesday showed an unexpected surge in new US home construction in November as builders continued to benefit from a limited supply of existing home sales.

In the corporate world, Alibaba Group Holding Chief Executive Officer Eddie Wu will take over the company’s core e-commerce business, replacing one of its most experienced executives at the helm of China’s biggest online marketplace.

Oil was little changed after two days of gains, as traders and shippers braced for the prospect of more disruption in the Red Sea. Gold was steady.

Key events this week:

UK inflation, Wednesday
US Conference Board consumer confidence, existing home sales, Wednesday
Bank Indonesia rate decision, Thursday
US GDP, initial jobless claims, Conf. Board leading index, Thursday
Nike earnings, Thursday
Japan inflation, Friday
UK GDP, Friday
US personal income and spending, new home sales, durable goods, University of Michigan consumer sentiment index, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 12:59 p.m. Tokyo time. The S&P 500 rose 0.6%
Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.5%
Japan’s Topix index rose 1%
Australia’s S&P/ASX 200 Index rose 0.6%
Hong Kong’s Hang Seng rose 1%
The Shanghai Composite fell 0.4%
Euro Stoxx 50 futures rose 0.2%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0970
The Japanese yen was little changed at 143.71 per dollar
The offshore yuan fell 0.2% to 7.1363 per dollar
The Australian dollar was little changed at $0.6769

Cryptocurrencies

Bitcoin fell 0.2% to $42 405
Ether was little changed at $2 185.4

Bonds

The yield on 10-year Treasuries declined two basis points to 3.91%
Japan’s 10-year yield declined seven basis points to 0.565%
Australia’s 10-year yield declined four basis points to 4.07%

Commodities

West Texas Intermediate crude was little changed
Spot gold was little changed