TOKYO, Dec 6 — Asia-Pacific equities gained today as bets firmed for a peak in interest rates among major central banks globally, as bond yields continued to decline.
Japanese government bond yields dipped to the lowest since mid-August as US Treasury yields hovered close to a three-month trough.
Meanwhile, crude oil sank to a nearly five-month low, while bullion held steady after dropping back from an all-time high. Bitcoin traded just below US$44,000 following its surge this week to a 20-month peak.
US 10-year Treasury yields held steady at around 4.186 per cent after touching 4.163 per cent yesterday as cooling labour market data cemented views that the Federal Reserve is done hiking rates, with bets on a first cut coming by March now at around 64 per cent, according to the CME Group’s FedWatch tool.
Benchmark JGBs yields slid in sympathy, reaching the lowest since August 16 at 0.62 per cent.
Lower borrowing costs boosted equity markets, with big tech a particular beneficiary.
Japan’s Nikkei surged 1.6 per cent, rebounding from yesterday’s mid-November low, while Australia’s stock benchmark jumped 1.4 per cent and South Korea’s KOSPI added 0.56 per cent.
US stock futures also pointed higher, with the tech-heavy Nasdaq indicated up 0.4 per cent following a 0.31 per cent advance overnight for the cash index. S&P 500 futures rose 0.26 per cent, after the cash index ended yesterday flat.
Overnight, US jobs figures came in softer than expected, but coupled with robust services data, added to the narrative for a soft landing for the economy as the Fed shifts to monetary easing, analysts said.
The “selloff in yields across the curve is strong evidence of the intense focus the market has on this week’s labour market data,” with the ADP employment report due later today and non-farm payrolls on Friday, said IG analyst Tony Sycamore.
For the Nasdaq, “although we remain bullish into year-end, we are not contemplating opening fresh longs at these levels,” Sycamore added, recommending buying on dips instead.
Chinese equities underperformed today, with sentiment fragile after ratings agency Moody’s slapped a downgrade warning on China’s credit rating.
Hong Kong’s Hang Seng rose 0.41 per cent, supported mainly by a rally in tech, with a sector subindex .HSTECH climbing about 1 per cent.
Mainland Chinese blue chips .CSI300 were flat.
With markets all but certain the Fed’s next move is a cut, dovish rhetoric from European Central Bank officials overnight and the Reserve Bank of Australia’s decision to hold policy steady yesterday have stoked bets for a peak in rates globally. The Bank of Canada is widely expected to adopt a wait-and-see attitude later today as well.
That has supported the US currency’s rebound from last week’s nearly four-month low versus major peers, with the US dollar index =USD steady at around 103.95 today, compared with a trough of 102.46 a week ago.
“The USD weakened when the Federal Reserve looked like they were cutting while other central banks were holding tight,” said James Kniveton, a senior corporate FX dealer at Convera in Melbourne.
“Now that looks to be changing, and other central banks are following the Fed’s lead.”
The dollar added 0.08 per cent to ¥147.265, while the euro was little changed at US$1.07935.
Gold was flat just below US$2,020, catching its breath following its surge to a record US$2,135.40 on Monday.
Bitcoin was steady at around US$43,850 after pushing as high as US$44,490 overnight, buoyed by both Fed rate cut expectations and speculation U.S regulators will soon approve exchange-traded spot bitcoin funds.
Crude eased further today, weighed down by the worsening demand outlook from China, and doubts about the impact of Opec cuts.
Brent crude futures fell 8 cents, or 0.1 per cent, to US$77.12 a barrel, while US WTI crude futures were down 13 cents, or 0.2 per cent, at US$72.19 a barrel. Both benchmarks closed at their lowest since July 6 in the previous session. — Reuters
