(Nov 26): Asian stocks extended their gains into a third day on Wednesday, tracking advances on Wall Street as weak US consumer data lifted bets on a Federal Reserve (Fed) interest-rate cut next month.
Gauges in Japan, South Korea and Australia all rose at the open after the S&P 500 Index rose 0.9% and the Nasdaq 100 climbed 0.6%. Chinese equities will be in focus as Alibaba Group Holding Ltd shares fell in US trading after its earnings.
Treasuries gave up some of their gains from the prior session, when news of White House National Economic Council director Kevin Hassett emerged as the front runner to be the next Fed chair, helped lift bonds. A Bloomberg gauge of the dollar fell to the lowest level in a week.
Stocks regained momentum as US consumer confidence in November saw its steepest drop since April, and retail sales rose modestly in September, suggesting consumer spending is cooling after months of strong demand. The delayed economic reports out of the US further cemented bets for a Fed cut in December, even after chair Jerome Powell warned last month that a reduction isn’t a foregone conclusion.
“This bounce is largely emotion and short-covering,” Dilin Wu, a strategist at Pepperstone Group Ltd, wrote in a note. With the US government shutdown disrupting economic releases, “the market is effectively flying half-blind. The sustainability of this rebound ultimately hinges on whether upcoming data confirm the soft-landing narrative”.
See also: Wall Street’s macro traders eye their biggest haul in 16 years
The latest US economic reports have taken on added weight ahead of the Fed’s December meeting, given the lack of fresh data. Governor Stephen Miran underscored that outlook by reaffirming his belief that the US economy requires substantial rate reductions.
While the Fed typically adjusts rates in 25‑basis‑point increments, it has on occasion moved by 50 basis points or more.
As bets on a rate cut increased, the yield on the benchmark US 10-year slipped to below 4% for the first time in almost a month.
See also: Asian stocks track US gains as rate-cut bets grow
Traders bolstered bets on lower rates over the next year, reflecting the view that a Hassett‑led Fed would deliver the aggressive cuts that US President Donald Trump has advocated.
“The argument will be a weaker US dollar, lower front-end rates from May’s meeting onwards and steeper curves,” said Jordan Rochester, the head of macro strategy at Mizuho in London. Hassett is “a credible economist by background, previously working at the Fed as a senior economist, but some may argue his closeness to Trump makes him the patsy”.
Investors will also focus on comments from the UK Chancellor of the Exchequer Rachel Reeves as she announces her budget.
In Asia, recent weakening of the yen is increasing the likelihood of the Bank of Japan raising its benchmark rate next month, according to a former executive director of the central bank. The currency hit a fresh 10-month low against the dollar last week and is fuelling inflationary pressure via higher import costs.
Elsewhere in commodities, oil steadied after closing at the lowest in a month on signs of progress towards a peace deal in Ukraine. Gold, which benefits when rates are cut, edged up 0.2%.
Corporate news:
- Alibaba posted better-than-projected 34% growth in its cloud business, offsetting a plunge in profit after the company unleashed spending on consumer subsidies and data centres to ride an artificial intelligence (AI) boom.
- HP Inc gave a profit outlook for the current year that fell short of estimates and the company said it will cut 4,000 to 6,000 employees through fiscal 2028 by using more AI tools.
- Dell Technologies Inc raised its annual projections for the key AI server market, a sign of sustained demand for the type of machines needed in the current data centre boom.
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Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9.16am Tokyo time on Wednesday
- Hang Seng futures rose 0.3%
- Japan’s Topix rose 1.1%
- Australia’s S&P/ASX 200 rose 1%
- Euro Stoxx 50 futures rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1566
- The Japanese yen fell 0.1% to 156.23 per dollar
- The offshore yuan was little changed at 7.0849 per dollar
- The Australian dollar was little changed at US$0.6471
Cryptocurrencies
- Bitcoin rose 0.4% to US$87,390.45
- Ether rose 0.8% to US$2,954.24
Bonds
- The yield on 10-year Treasuries was little changed at 4.00%
- Australia’s 10-year yield advanced one basis point to 4.44%
Commodities
- West Texas Intermediate crude rose 0.1% to US$58.02 a barrel
- Spot gold rose 0.2% to US$4,139.62 an ounce
Uploaded by Tham Yek Lee
