Asian markets extend US rally as confidence in interest rates grows

Expectations that financial conditions will become easier in the new year as inflation declines have increased the rush to return to risky assets in recent weeks and pushed the dollar lower against its peers.

New York’s three major indexes extended gains on Monday, with the Nasdaq hitting a 22-month high thanks to advances in technology giants including Amazon, Microsoft and Nvidia.

Gains were boosted by the successful sale of 20-year US Treasuries, which depressed yields on other securities. Talk is now growing that the Fed may cut borrowing costs as early as March, much earlier than previous bets on the second half of 2024.

“Some professional investors have turned broadly bullish on bonds amid weak US economic data and speculation that the Fed is not only raising interest rates, but may be preparing to implement so-called ‘lockdown cuts,’” said Stephen Innes, of SPI Asset Management. “Starting in March.” .

Hong Kong led the way in Asia, gaining more than one percent, after jumping about two percent on Monday.

Shares of market heavyweight Alibaba jumped more than three percent to continue its recovery after falling 10 percent on Friday following news of canceling the separation of its cloud computing arm.

Shares in Shanghai, Sydney, Seoul, Taipei and Manila also rose, although Tokyo suffered due to the appreciation of the yen.

The yen rebounded after approaching its lowest level in 32 years at 151.95 against the dollar in October as expectations for US interest rates declined and speculation increased that the Bank of Japan was considering shifting away from its ultra-loose policies.

The US currency also fell against the euro and the pound.

However, while traders are comfortable with the idea of ​​lower interest rates in the new year, Fed officials remain cautious.

In his latest remarks, Richmond Fed President Thomas Barkin warned that the bank still has a lot of work to do to kill inflation, which remains well above the 3.2% target.

“The economy is still growing — unemployment is still 3.9% and…inflation seems to be stabilizing. So that’s all good,” he told Fox Business.

“But the job is not over yet, so you have to keep going until the job is done, and we will see where we get.”

He added that with “stubborn inflation”, he would prefer to keep interest rates high for a long period, but the duration will depend on incoming data.

Traders are now awaiting the release of minutes from the Fed’s November policy meeting, when it held interest rates, while officials’ comments will also be weighed ahead of their final meeting of the year on December 12-13.

Key numbers around 0230 GMT

Tokyo – Nikkei 225: down 0.2% to 33,338.29 (break)

Hong Kong – Hang Seng Index: rose 1.5 percent to 18,036.96

Shanghai – Composite: rose 0.6 percent to 3,087.02

USD/JPY: Decreased to 148.01 yen from 148.31 yen on Monday

GBP/USD: rose to $1.2512 from $1.2502

EUR/USD: rose to $1.0949 from $1.0945

EUR/Pound: rose to 87.50 pence from 87.48 pence

West Texas Intermediate crude: fell 0.1% to $77.79 per barrel

Brent North Sea crude fell 0.1 percent to $82.24 a barrel

New York – Dow Jones: up 0.6% to 35,151.04 (close)

London – FTSE 100 index: down 0.1 percent to 7496.36 (close)