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Stocks in Asia and US equity futures extended their advance as weak US manufacturing data damped bets on the Federal Reserve’s hawkishness.
The MSCI Asia Pacific Index rallied more than 2 percent to head for its highest in a week, sparked by a broad rebound in the region.
Japan’s Topix stock benchmark jumped more than 3 percent, boosted by technology shares.
Treasuries climbed across the board, with the yield on the 10-year note extending declines after sliding 19 basis points on Monday. Stocks and US government bonds got a new lease of life after a disappointing US manufacturing report prompted traders to unwind bets for continued aggressive tightening by the Fed.
The dollar fell
Australia’s central bank surprised investors by raising interest rates by a quarter percentage point — ending a streak of outsized increases and sending the nation’s currency and government bond yields tumbling. In the latest sign the Fed’s five rate hikes totalling 3 percentage points may be taking their toll, the Institute for Supply Management’s gauge of factory activity fell to a more than two-year low.
The Fed should consider stopping its tightening campaign after one more interest-rate hike in November, according to Ed Yardeni, a market veteran who coined terms like “Fed Model” and “bond vigilante.”
Fed speakers continued the drumbeat over rate hikes.
New York Fed President John Williams said the US central bank has yet to raise interest rates to levels that are restricting economic growth, and tightening still has “significant” ways to go.
The Fed will continue to raise rates as it has made it clear that inflation is its number one target, according to Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management.
“They’re going to continue to do some things to get it down and I do think it’s gonna cause a recession next year, but I don’t think they’re gonna stop right away,” Landsberg said on Bloomberg Television.
China’s onshore markets will remain shut this week for holidays, while the Hong Kong exchange is closed Tuesday for the Chung Yeung Festival.
Elsewhere, oil traded around US$84 per barrel after posting the biggest one-day gain since May as the market looked to OPEC+ to deliver a substantial cut in supply.
Brazilian assets soared after President Jair Bolsonaro secured his way to a runoff election against Luiz Inacio Lula da Silva as investors cheered on the incumbent’s better-than-expected showing and bet his leftist challenger will be forced to moderate his stances in the second stretch of the race.
The real was the best-performing among the world’s major currencies on Monday. —Bloomberg
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