Stocks rise, dollar squeezed as inflation pulls bets on rate hike

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A man wearing a face mask amid the coronavirus disease (COVID-19) outbreak looks at an electronic board displaying the Japan Nikkei Index outside a brokerage house in Tokyo, Japan on September 24 2021. REUTERS / Kim Kyung-Hoon

  • MSCI AxJ index up 0.4%; Nikkei up 1%
  • The Treasury yield curve flattens; dollar rally pauses
  • Fed Speakers, US PPI Data Expected

SINGAPORE, Oct. 14 (Reuters) – Asian stock markets rose, the dollar eased and longer-dated bonds rallied on Thursday as investors counted on inflation leading to rate hikes around the world .

The largest MSCI index of Asia-Pacific stocks excluding Japan (.MIAPJ0000PUS) gained 0.4%. The Japanese Nikkei (.N225) climbed 1%.

The Shanghai Composite (.SSEC) was slightly weaker as Hong Kong markets were closed for a holiday.

Overnight figures showed another solid increase in consumer prices in the United States, while minutes from last month’s Federal Reserve meeting showed growing concern among policymakers over inflation and general agreement to begin gradually to reduce asset purchases soon.

Traders responded by advancing expectations of rate hikes but lowering the expected peak. Fed funds futures advanced the first hike of late 2022 to almost fully assess a 25 basis point hike by September, but prices also suggest rates hovering around just 1.5% in five years.

Gold had its best session in seven months.

In the bond market, short-term Treasury yields rose while long-term yields fell, flattening the curve. Longer-term yields also fell in Asia on Thursday and the dollar, which rallied until September, fell sharply with lower yields on longer-term Treasuries and paused on Thursday. .

“The market continued to push prices for the first rate hike while lowering prices for terminal rates, which in our view reflects market prices in a policy error,” Values ​​analysts said. TD Securities.

Overnight on Wall Street, the S&P 500 (.SPX) rose 0.3% and at the start of trading in Asia, futures on the S&P 500 also rose 0.3%.

Data from Wednesday showed that consumer prices in the United States rose 5.4% year-on-year last month and that rent increases appeared to be accelerating, which, along with soaring costs of l energy, increases the risk of persistent pressure on prices. Read more

Contrary to readings at the Fed’s meetings over the summer, policymakers were also no longer described as “generally” expecting inflationary pressures to ease. Read more

Policymakers spoke about the timing and structure of the reduction in bond purchases, and the minutes said that if a decision to start cutting down was made next month, the process could begin in mid-November or in mid-December.

Coming on Thursday, markets await US producer prices and unemployment claims figures as well as appearances from Bank of England and Federal Reserve policymakers.

POLITICAL FOCUS

Elsewhere, Singapore’s central bank unexpectedly tightened monetary policy, citing expectations of rising inflation. Read more

In China, producer prices rose at their fastest pace since the series began in 1996, data showed Thursday. Read more

In Australia, a drop in employment figures and a central bank official’s remarks on lagging wages haven’t derailed a build-up of recent bets on rate hikes from the year next. Read more

Swap markets have built in around 90 basis points of rate hikes by the end of 2023, although the Reserve Bank of Australia has insisted any hikes before 2024 are unlikely.

Currency markets were fairly calm on Thursday after the dollar fell overnight, which was its biggest drop against the euro in five months.

The euro held steady at $ 1.1591 in Asia while the British pound, Australian dollar and New Zealand dollar held onto gains on Wednesday, as did the Chinese yuan.

The Singapore dollar hit a three-week high.

Oil futures stabilized on Thursday, hovering comfortably above $ 80 a barrel, US crude at $ 80.55 a barrel and Brent at $ 83.32.

Gold kept its overnight gains at $ 1,789 an ounce.

The 10-year Treasury yield held steady at 1.5525% after falling three basis points overnight and the two-year yield eased slightly to 0.356% after rising 1.8 basis points. overnight base.

Bitcoin rose 1.5% to $ 58,550, its highest level since May.

Reporting by Tom Westbrook; Editing by Edwina Gibbs

Our Standards: Thomson Reuters Trust Principles.

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