Asian equities were poised to climb after a rally in stocks linked to artificial intelligence drove US benchmarks higher, while expectations for more stimulus in China saw commodities gain.
The S&P 500 rose for a sixth day — its longest winning run since November 2021 — providing impetus from Wall Street for Asian benchmarks. Futures for Hong Kong and Australia gained, while those for Japan were little changed after a strong rally earlier this week and amid caution ahead of a Bank of Japan meeting later Friday. The dollar slumped while the Bloomberg Commodity Index had its biggest advance since November.
The US stock rally driven by the exuberance surrounding artificial intelligence is widening beyond the tech industry, raising concern about an overbought market. Bets that the Federal Reserve will end its tightening cycle sooner rather than later to prevent a recession added fuel to the equity advance, with the S&P 500 topping 4,400 while the Nasdaq 100 hit the highest since March 2022.
Bonds climbed Thursday, with the yield on 10-year Treasuries declining seven basis points to 3.72% and Australian notes following suit in early trading Friday. The key yield curve between three- and 10-year Australian bonds remained inverted after turning on Thursday, as traders see the prospect of more rate hikes causing an economic downturn.
The dollar slumped the most since February while the euro rallied as the European Central Bank lifted interest rates by another quarter-point, with President Christine Lagarde describing a further hike in July as “very likely.”
The move came a day after Fed officials paused their series of interest-rate hikes, but projected borrowing costs will go higher than previously expected, owing to what Chair Jerome Powell called surprisingly persistent inflation and labor-market strength.
The Fed is now in a “data-dependent” mode before it delivers what may be just one final increase in US borrowing costs next month, former Vice President Richard Clarida said.
“It was what I would call an awkward but hawkish pause,” Clarida, who is now a global economic adviser at Pacific Investment Management Co. told Bloomberg Television on Thursday.
The yen pared some losses after touching its weakest level against the dollar since November, with traders looking ahead to the Bank of Japan policy meeting. The central bank is expected to maintain its negative rate policy and yield curve control program.
Wall Street’s fervor will face a big test on Friday with the expiration of a massive amount of options contracts tied to stocks and indexes. The event, known as OpEx, typically obliges traders to either roll over existing positions or start new ones. That usually involves portfolio adjustments that lead to a spike in volume and sudden price swings.
“US stocks have defied skeptics and rallied this year in the face of bank collapses, constant fears of a recession, and what’s expected to be a slowdown in corporate profits,” said Arthur Hogan, chief market strategist at B. Riley Wealth. “For our part, we assume that inflation will look better in the second half.”
Elsewhere, Bitcoin’s share of total crypto market value is the highest in about 20 months, a sign of the cautious mood in digital assets.
Key events this week:
- Bank of Japan rate decision, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 8:13 a.m. in Tokyo. The S&P 500 rose 1.2%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 1.2%
- Hang Seng futures rose 0.7%
- S&P/ASX 200 futures rose 0.4%
- Nikkei 225 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0948
- The Japanese yen was little changed at 140.17 per dollar
- The offshore yuan was little changed at 7.1215 per dollar
Cryptocurrencies
- Bitcoin rose 0.1% to $25,580.76
- Ether fell 0.3% to $1,663.54
Bonds
- The yield on 10-year Treasuries declined seven basis points to 3.72%
- Australia’s 10-year yield declined four basis points to 3.96%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth and Matthew Burgess.
