Asian shares higher on signs of U.S. Fed slowdown, China stimulus

SYDNEY, Nov 24 (Reuters) – Asian stocks followed Wall Street higher on Thursday, buoyed by signals that the U.S. Federal Reserve may slow the pace of interest rate hikes and news of further economic stimulus of China, the dollar failing to recoup its losses.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 0.8% in early trading, boosted by a 0.6% gain in South Korean stocks, a rise of 0, 5% in Chinese bluechips (.CSI300) and a 0.9% jump in Hong Kong’s Hang Seng Index (.HSI.)

The Japanese Nikkei (.N225) jumped 1.3%.

S&P 500 futures rose 0.2%, while Nasdaq futures rose 0.3%, after modest gains in US stocks on Wednesday.

On Thursday, the Bank of Korea eased the pace of tightening to a more modest 25 basis points, joining other central banks that have backed away from outsized hikes amid a looming global recession.

Minutes from the last US Federal Reserve meeting also showed that a “substantial majority” of Fed policymakers agreed that it would “probably soon be appropriate” to slow the pace of interest rate hikes. .

“Overall, it is clear from the minutes that FOMC participants are committed to raising the policy rate further in the face of a very tight labor market and unacceptably high inflation,” Barclays analysts said.

“However, the minutes also reveal an emerging divergence of views among members on the peak rate and uncertainty over the peak rate.”

The futures market is implying a 76% chance of a 50 basis point rise to 4.25%-4.5% at the December meeting, while a majority of investors expect the US federal funds target rate peaks above 5% by next May.

U.S. economic data on Wednesday showed jobless claims rose more than expected last week, while business activity contracted for a fifth month in November.

In Japan, data on Thursday showed manufacturing activity contracted at the fastest pace in two years in November.

Meanwhile, in China, COVID cases have continued to rise as the economic toll from mobility restrictions and lockdowns mounts.

China’s cabinet flagged the possibility of an upcoming cut in banks’ reserve requirement ratio (RRR) on Wednesday, promising further stimulus to revive its COVID-battered economy.

The U.S. dollar failed to recoup overnight losses of 1% on Thursday, with the index standing at 105.89 against a basket of currencies.

In the oil market, prices are set to test a major support level from September, which if broken could see oil fall to levels not seen before the end of 2021, adding to the evidence that the inflation has probably started to come down.

U.S. crude oil futures fell 0.2% to $77.79 a barrel, after falling more than 3% on Wednesday as the Group of Seven (G7) countries considered a price cap of Russian oil above the current market level.

Brent crude futures fell 0.15% to $85.26.

In the bond market, long-term US Treasuries rallied overnight on Fed minutes. Yields on 10-year notes fell to a whopping 79 basis points short of two-year yields, a curve inversion on a scale not seen since the dot.com collapse in 2000 and, at first view, a signal that investors expect a deep economic slowdown in the coming months.

US markets are closed for the Thanksgiving holiday on Thursday.

Reporting by Stella Qiu; Editing by Tom Hogue

Our standards: The Thomson Reuters Trust Principles.

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