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Asian equities and US stock futures advanced in the wake of a shock rebound in US stocks that roared back from losses sparked by a hot inflation reading. That triggered a broader risk rally that also saw currencies gain against the greenback.
An index of the region’s equities extended gains and was poised to snap a five-day losing streak. The S&P 500 defied expectations to rally 2.6% after consumer price data cemented bets for the Federal Reserve to deliver another jumbo rate hike in November.
Currencies in the G-10 strengthened against the US dollar, but the yen remained on the back foot after falling to its lowest level in more than 30 years after the US CPI data release, only to reverse the move in a whiplash trade that raised chatter of potential intervention.
Treasuries fluctuated after the policy-sensitive two-year yield soared 17 basis points on Thursday. The 10-year yield was slightly down, trading at about 3.92% in Asian hours.
Cryptocurrencies also got a boost from the improved risk appetite in global markets, lifting Bitcoin to a one-week high and putting the largest token on the cusp of retaking the $20,000 level.
Rebound from bottom levels
With higher interest rates piling pressure on an already struggling global economy, the surge on Wall Street underscores the difficulties traders face in volatile markets. Speculation the yearlong selloff in equities had reached a bottom was cited as one potential reason for the rebound. Others included short covering, less-than-terrible earnings reports and sturdy positioning including well-provisioned hedges.
Market bets on rates still lean toward back-to-back 75 basis-point hikes at the next two Fed meetings and expect the central bank to push rates past 4.85% before the tightening cycle ends.
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Singapore’s central bank tightened monetary policy settings, keeping up its fight against inflation amid a darkening global economic outlook. The Singapore dollar rose by the most in more than a week.
Meanwhile, UK markets remained in turmoil almost two weeks after the government unveiled a plan to drastically cut taxes. The pound posted its biggest gain since March 2020 on Thursday after the government signaled a U-turn on a central part of its tax agenda. The currency steadied on Friday.
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