Asian stocks rally as US shares near fresh record

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares in Asia rose Friday after an upbeat day on Wall Street following jobs data that supported the case for US rate cuts.

Equities in Japan, South Korea and Australia climbed alongside futures for Hong Kong. US contracts also drifted higher after the S&P 500 index gained 0.5% to trade less than 1% away from its all-time high on Thursday. The Nasdaq 100 index rose 0.2%.

Treasuries held a Thursday rally as Australian and New Zealand government bonds played catch-up, edging higher in early Friday trading. The US 10-year yield edged four basis points lower to 4.45% on Thursday, supported by a successful $25 billion sale of 30-year US bonds.

Initial applications for US unemployment benefits rose last week to the highest level since August, topping estimates, with cooling in the jobs market supporting the case for interest rate cuts. Fed Bank of San Francisco President Mary Daly said rates are currently restraining the economy, but it may take “more time” to return inflation to their goal.

“Time will tell whether it’s a one-off or part of a genuine cooldown in the labor market,” said Chris Larkin at E*Trade from Morgan Stanley. “Investors may have adjusted to the idea of the Fed waiting until September to cut interest rates, but that doesn’t mean they’re comfortable waiting indefinitely.”

Emerging market currencies extended gains against the greenback, which was steady after weakening Thursday as US yields fell. The dollar’s move failed to lift the yen after trading flat Thursday and was little changed early Friday at around 155 per dollar.

The pound was little changed after a Thursday rally that came despite growing confidence the Bank of England may soon begin loosening policy.

Data set for release in Asia Friday includes industrial output for India, and the first-quarter current account balance for China. New loans and money supply data for China may also be released as early as today.

Elsewhere, JPMorgan Chase & Co. said it was on track to include India in its emerging market debt index from June, a move that is expected to drive inflows from global investors. Meanwhile, Oversea-Chinese Banking Corp. offered S$1.4 billion ($1 billion) to buy the remaining stake in Great Eastern Holdings Ltd. that it does not currently own, in an effort to solidify its wealth management leadership position.

Oil extended gains into a third day as key technical levels provided a floor for losses while investors digested a mixed US inventories report. Gold traded little changed after jumping more than 1% on Thursday. Bitcoin climbed above $63,000.

US Rebound

To Doug Ramsey at Leuthold, another 10% gain in the S&P 500 isn’t out of the question, at least statistically. He analyzed 80 years of data on bull-market rallies, focusing on those that happened when unemployment was this low and the economic cycle this mature. If the current rally meets the prior records for length and height, the S&P 500 would end the year at 5,705.

Apple Inc.’s stock climbed as Bloomberg News reported the company will deliver some of its upcoming artificial-intelligence features this year via data centers equipped with its own in-house processors. Nvidia Corp. led losses in chipmakers.

Blackstone Inc. President Jon Gray said economic growth will slow as stubborn inflation weighs on the Fed’s ability to begin lowering borrowing costs.

“We see a deceleration of growth,” Gray said at the Macquarie Australia Conference in Sydney on Thursday. “Central banks will be slow on the cutting of rates, because they don’t want to see a rise of inflation,” he said. “The Fed will be patient, they’ll have the opportunity to cut once this year,” he added.

If the economy is slowing, unemployment rising, inflation receding, and the Fed is expected to cut rates, there will be plenty of buyers for US Treasury notes and bonds, according to Joe Kalish at Ned Davis Research.

“But make no mistake. When conditions change, prices can change too – and quickly!”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow