Asian shares rise as China mulls stimulus

Asian shares have tracked Wall Street higher buoyed by signals the United States Federal Reserve might slow the pace of interest rate hikes and news of fresh economic stimulus from China, with the dollar failing to recoup losses.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8 per cent in early trade, boosted by a 0.6 per cent gain in South Korean shares, a 0.5 per cent increase in China’s blue chips and a 0.9 per cent jump in Hong Kong’s Hang Seng index

Japan’s Nikkei surged 1.3 per cent.

S&P 500 futures were up 0.2 per cent, while Nasdaq futures rose 0.3 per cent, after modest gains in US stocks on Wednesday.

On Thursday, Bank of Korea slowed down the pace of tightening to a more modest 25 basis points, joining other central banks that have downshifted away from outsized hikes amid a looming global recession.

Minutes of the US Federal Reserve’s last meeting also showed a “substantial majority” of Fed policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes.

“In all, it is clear from the minutes that FOMC participants are determined to further raise the policy rate in the face of a very tight labour market and unacceptably high inflation,” analysts at Barclays said.

“However, the minutes also reveal an emerging divergence of views among members about the peak rate and uncertainty about the peak rate.”

The futures market implies a 76 per cent chance of a rise of 50 basis points to 4.25 per cent-4.5 per cent at the December meeting, while a majority of investors expect the target US federal funds rate will peak above 5.0 per cent by next May.

US economic data on Wednesday showed jobless claims increased more than expected last week, while business activity contracted for a fifth month in November.

In Japan, data on Thursday showed manufacturing activity contracted at the fastest pace in two years in November.

Meanwhile, in China, COVID-19 cases continued to surge, with the economic toll from mobility restrictions and lockdowns piling up.

China’s cabinet on Wednesday flagged the possibility of an upcoming cut to banks’ reserve requirement ratio (RRR), pledging new stimulus measures to revive its COVID-battered economy.

The US dollar on Thursday failed to recoup overnight losses of 1.0 per cent with the index standing at 105.89 against a basket of currencies.

In the oil market, prices are set to test a major support level from September, which if breached could see oil tumbling to levels not seen before late 2021, adding to the evidence that inflation likely has started coming down.

US crude oil futures eased 0.2 per cent to $77.79 per barrel, after tumbling more than 3.0 per cent on Wednesday, as the Group of Seven (G7) nations considered a price cap on Russian oil above the current market level.

Brent crude futures fell 0.15 per cent to $85.26.

In the bond market, long-term US 

Treasuries rallied overnight after the Fed minutes. 

Yields on 10-year notes dropped to a huge 79-basis-points deficit to two-year yields, a curve inversion on a scale not seen since the dot.com bust of 2000 and, on the face of it, a signal investors expect a deep economic downturn in coming months.

US markets are closed for the Thanksgiving holiday on Thursday.