Asian stocks gain after Fed allays fear of a rate hike

Singapore — Asian stocks and US futures rose on Thursday after the Federal Reserve downplayed risks of an interest rate hike, while the yen was bumpy after another burst of suspected intervention from Japan.

Shortly after Fed chair Jerome Powell had finished telling reporters the Fed may have to leave rates elevated, the yen surged against the dollar.

It was the second sudden leap in the ailing Japanese currency this week and markets have assumed it is authorities stepping in as yen-buyers. The yen traded as strong as ¥153 to the dollar before sliding back to about ¥156 in Asia.

S&P 500 futures rose 0.5%, pointing to the cash market recouping a late slide on Wall Street. MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.6%, led by a 2% surge in Hong Kong.

Tokyo’s Nikkei was flat.

Oil was nursing a heavy fall on demand worry and a surprise jump in US stockpiles. Brent crude futures were up 30c a barrel to $83.74, after touching a seven-week low of $83.29 on Thursday. US crude was at $79.31 a barrel

The Federal Reserve had left interest rates on hold and Powell told reporters that inflation was too high and progress in bringing it down was uncertain. But he did not entertain growing speculation the Fed may need to hike rates.

“There are paths to not cutting and there are paths to cutting. It's really going to depend on the data,” he said, which traders interpreted as all but ruling out a rate hike.

“The key takeaway is the Fed still thinks it’s much more likely the next move is a cut, than a hike, and the door is very much open,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

Treasuries rallied, pushing yields lower, as the Fed also said it would slow down its balance-sheet runoff. However, in Asia some of that move was unwound. Ten-year treasury yields rose 3.3 basis points (bps) to 4.624% in Tokyo, having fallen 9.3bps in New York on Thursday. .

Two-year year yields, which fell more than 10bps in New York overnight, rose 1.2bps to 4.951%.

After pricing in as many as six rate cuts for 2024 earlier in the year, markets now price only one, in December.

Intervention watch

In foreign exchange trade all eyes were on the yen, which after a leap in late New York trade spent much of the Asia session giving up a majority those gains. The yen has been on a downtrend for years as global interest rates have gone up sharply while Japan’s stayed ultra-low.

The dollar was last up about 1% to ¥156, the euro was up 1% at ¥167.19 and the Aussie was trading near ¥102. Tokyo money market data indicated Japanese authorities may have spent nearly $35bn buying the yen on Monday, not long after it had touched ¥160 to the dollar, lows last visited over three decades ago.

“There is persistent pressure on the yen to weaken in the medium to long term,” said Hirofumi Suzuki, chief FX strategist at SMBC in Tokyo.

“Even if there is FX intervention, it will not change the yen’s depreciation trend. The Fed’s monetary policy developments remain most important in the medium to long term.”

On the earnings front chipmaker Qualcomm beat market expectations for sales and profit, sending its shares up 4% in after-hours trading.

Focus later on Thursday will be on Apple results, where markets have braced for a big drop in sales and are waiting to hear of the company’s plans for artificial intelligence (AI) in iPhones.

Outside oil, trade in other commodities was subdued by holidays in China, where markets are closed for the rest of the week. Gold rose overnight and was last holding at $2,319 in Asia trade.

Reuters