Asian shares mostly rose Thursday as investors awaited the release of US consumer price data and kept a cautious watch on the war between Israel and the Palestinian militant group Hamas.
Tensions in the Middle East are under the spotlight, the stock market got a boost from that drop in longer-term yields, but it also felt a drag from rising shorter-term yields.
Asian shares mostly rose Thursday as investors awaited the release of US consumer price data and kept a cautious watch on the war between Israel and the Palestinian militant group Hamas.
Japan's benchmark Nikkei 225 jumped 1.6 per cent to 32,442.08. Sydney's S&P/ASX 200 gained 0.1 per cent to 7,097.50. South Korea's Kospi added 1 per cent to 2,474.32. Hong Kong's Hang Seng surged 1.9 per cent to 18,228.96, while the Shanghai Composite rose 0.7 per cent to 3,099.21.
“Recent remarks from FOMC members have leaned dovish, suggesting that the Fed might maintain current short-term rates,” Anderson Alves at ActivTrades said in a report, referring to the US Federal Reserve's action on interest rates.
Tensions in the Middle East are under the spotlight, with a possible escalation if nations like Lebanon or Iran are drawn in, which would set off significant movement in US Treasuries, he said.
On Wall Street, the S&P 500 rose 0.4 per cent to 4,376.95 for its fourth straight gain. The Dow Jones Industrial Average added 0.2 per cent to 33,804.87, and the Nasdaq composite gained 0.7 per cent to 13,659.68. All three indexes moved between small gains and losses through the day.
Wall Street has been mostly struggling since the summer as longer-term yields shoot higher in the bond market, weighing on prices for all kinds of investments. Some relief has come this week, and yields have eased after officials at the Federal Reserve suggested they may be done raising their main overnight interest rate.
The yield on the 10-year Treasury fell to 4.57 per cent from 4.66 per cent late Tuesday and from more than 4.80 per cent last week, when it reached its highest level since 2007. Besides hurting prices for investments, high yields have jacked up rates for mortgages and other loans, which saps momentum from the economy.
The stock market got a boost from that drop in longer-term yields, but it also felt a drag from rising shorter-term yields. The two-year Treasury yield, which moves more closely with expectations for the Fed, ticked up to 4.99 per cent from 4.97 per cent.
Yields were mixed after a report showed inflation at the wholesale level was stronger last month than economists expected. A report showing how much inflation US households are facing will arrive on Thursday, and economists expect it to show a slowdown.
While the report on wholesale inflation was above expectations, Rubeela Farooqi, chief US economist at High Frequency Economics, said it wasn't enough to change her forecast that the Fed's main interest rate is already at its peak.
“Fed officials are gradually taking comfort with the fact that the July rate hike may have been the last one in this historic tightening cycle,” said Gregory Daco, chief economist at EY.
Minutes from the Fed's meeting last month suggested officials see the outlook for the US economy as particularly uncertain. They said they were ready to “proceed carefully” in deciding what to do next with rates.
Still, with the US government racking up big deficits that require more borrowing, and buyers in shorter supply, the pressure has been mostly upward on Treasury yields.
In energy trading, a further pullback in crude oil prices is helping to take some heat off inflation and support Wall Street. Benchmark US crude lost 58 cents to USD 82.91 a barrel in electronic trading on the New York Mercantile Exchange. It slumped USD 2.48 to settle at USD 83.49 on Wednesday. Brent crude, the international standard, fell 50 cents to USD 85.32 per barrel.
Oil prices have given back much of their strong gains from earlier this week, triggered by fighting in Gaza. Though the area doesn't produce much oil, the worry is that the violence could spill into the politics around the crude market and hurt the flow of petroleum.
Energy stocks in the S&P 500 logged the sharpest losses among the 11 sectors that make up the index.
Exxon Mobil felt extra pressure after it said it would buy Pioneer Natural Resources in an all-stock deal valued at USD 59.5 billion. Exxon Mobil fell 3.6 per cent, and Pioneer Natural Resources rose 1.4 per cent.
In currency trading, the US dollar rose to 149.27 Japanese yen from 149.07 yen. The euro cost USD 1.0623, little changed from USD 1.0626