SYDNEY: Asian shares are set to end a tough November on steadier ground as revived hopes of an imminent U.S. rate cut helped soothe valuation jitters and sent Treasuries rallying for a fourth straight month.
U.S. markets, which were closed overnight for the Thanksgiving holiday, are due for a shortened session on Friday, so activity is more muted than usual across the major asset classes. European stocks traded mostly higher, while currencies were much more sedate.
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat on Friday, leaving it on track for a 3% gain in the week, the first weekly rise in four. For the month, it was still down 2.7%.
Japan’s Nikkei was also little moved and was headed for a weekly rise of 3.2%. For the month, it was, however, down 4.3%.
South Korean shares were, however, down 1% after the country’s central bank held rates steady and signalled an end to the easing cycle. Still, the index is up 2.5% in the week.
November this year proved to be unusually choppy for global equities as concerns about tech stocks’ sky-high valuations shook markets while a U.S. government shutdown ended only after a record 43 days. The risk-barometer Bitcoin slid 17% in November.
The lack of economic data from the government shutdown has made the Federal Reserve cautious about further policy easing, but heavyweights like Fed Governor Christopher Waller and New York Fed President John Williams have voiced support for a rate cut next month, stabilising sentiment.
Fed funds futures are implying an 85% chance of a rate cut next month, a sea change from just 30% a week earlier, CME FedWatch showed.
“If I put it all together, and if I look at valuation compared to bubbles in the past, for example, I think we’re not there fully yet,” said Vincenzo Vedda, chief investment officer at DWS.
“We believe generally that inflation remains in check… Generally speaking, in the next 12 months, we have decent growth… Overall, you have a benign environment for risky assets.”
Chinese blue-chips slipped 0.1% on Friday, while Hong Kong’s Hang Seng index rose 0.3%.
Boj Hike In View
Data showed on Friday that core consumer prices in Tokyo rose 2.8% in November from a year earlier, above forecasts for a 2.7% gain. That added to a slew of data that have kept bets for a rate hike from the Bank of Japan alive.
There are growing whispers that the BOJ could hike rates as soon as next month, which is now about 30% priced in by markets. More BOJ board members are signalling a hike as the yen tumbled and political pressures to keep rates low faded.
The yen was flat at 156.37 per dollar, having bounced off a 10-month low of 157.9 hit last week. Investors are watching for intervention from Japanese authorities after weeks of verbal jawboning to stem the currency’s relentless slide.
In the broader currency market, the dollar was steady against its major peers on Friday but was set for a weekly loss of 0.7%, the biggest since July.
The Aussie and the kiwi are big gainers this week, up 1.2% and 2%, respectively, as markets bet that the policy easing cycles in both countries are nearing an end. Minutes from the European Central Bank’s latest meeting showed policymakers there were not in a rush to cut rates either.
Prospects of Fed easing policy in December added to the rally in Treasuries. Benchmark 10-year Treasury yields held at 4.0094% and were set for a monthly drop of 10 basis points to mark the fourth straight month of declines.
Oil prices were little changed on Friday but were set for a fourth straight month of losses as the U.S. pushed for the peace plan for the Ukraine-Russia war. Front-month Brent crude futures , which expire on Friday, were unchanged at $63.34 a barrel.
Spot gold prices climbed 0.7% to $4,186 per ounce, bringing the monthly gain to 4.6%, although they are still some distance away from the record high of $4,381.
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