The Hang Seng increased around 3 per cent, breaking above its 50-day moving average, while Japan’s Nikkei was 2.3 per cent higher
Asian stocks soared to two-month highs on Wednesday in anticipation of stimulus in China and an end to rate hikes in the US, while the dollar nursed steep losses in the wake of a benign U.S. inflation report.
The Hang Seng increased around 3 per cent, breaking above its 50-day moving average, while Japan’s Nikkei was 2.3 per cent higher.
Bond markets across Asia marked their strongest gains since March, although rallies in Treasuries and in U.S. and European equity futures turned into steady trade.
U.S. headline consumer prices were flat in October, against expectations for a 0.1 per cent increase, data showed on Tuesday. Core CPI, at 0.2 per cent, also came in below a forecast of 0.3 per cent.
I think the CPI number has just pushed the last person to cover their shorts, Naka Matsuzawa, said Nomura’s chief macro strategist.
He sees a “more complicated” process ahead, where stock market exuberance eventually collides with bond market expectations that an economic slowdown will drive rate cuts.
The bond market is probably more vulnerable than equities, Matsuzawa added.
Overnight, the Nasdaq climbed 2.4 per cent and the small-cap Russel 2000 index jumped 5 per cent. The U.S. dollar slipped 1.6 per cent on the euro and 2 per cent on the Australian and New Zealand dollars.
Interest rate futures swung to price in a rate cut as early as May, with a 30 per cent possibility it could come even sooner, in March. Two-year Treasury yields declined 22 basis points overnight and were mostly steady through Asia trade at 4.84 per cent.
British inflation data, due at 0700 GMT, U.S. retail sales, due at 1330 GMT, and an expected meeting between U.S. President Joe Biden and Chinese President Xi Jinping are the next focus for financial markets.