Asia shares hit all-time high, eyes turn to Fed

Reuters SYDNEY | Updated on October 29, 2019

Asian shares rose to a three-month peak on Tuesday after Wall Street hit all-time highs amid hopes of progress in Sino-US trade talks and for another dose of policy stimulus from the Federal Reserve this week.

Japan's Nikkei led the way with a rise of 0.5per cent to reach ground last trod a full year ago, while Shanghai blue chips dithered either side of flat.

MSCI's broadest index of Asia-Pacific shares outside Japan crept up 0.2per cent to its highest since late July.

E-Mini futures for the S&P 500 extended their gains by 0.1per cent and EUROSTOXX 50 futures held steady.

US President Donald Trump said on Monday he expected to sign a significant part of the trade deal with China ahead of schedule but did not elaborate on the timing.

The US trade representative also said they were studying whether to extend tariff suspensions on $34 billion of Chinese goods set to expire on Dec. 28 this year.

“The market appears to be interpreting the improvement in trade talks as a positive sign that the US will suspend its planned tariffs on $160 billion of Chinese imports due to take place in December,” said Rodrigo Catril, a senior FX strategist at National Australia Bank.

“This is a big assumption as talks could easily fail again if both parties don't find a compromise.”

On Wall Street, the S&P 500 gained 0.56per cent to score a record closing peak, while the Dow rose 0.49per cent and the Nasdaq 1.01per cent .

Microsoft Corp climbed 2.46per cent after winning the Pentagon's $10 billion cloud computing contract, beating out Inc.

Google parent Alphabet Inc slipped in late NY trade after missing analysts' estimates for quarterly profit even though revenue growth topped expectations.


The embrace of risk left bonds out in the cold, and yields on two-year Treasury notes hit four-week highs at 1.667 per cent .

Bond investors are still looking forward to a likely rate cut from the Federal Reserve on Wednesday, though they also suspect officials might sound cautious on moving yet further.

“Some/many Fed participants may think/hope that the October cut will be the last of this cycle,” Michelle Girard, chief US economist at NatWest Markets, said in a report.

“However, we expect weaker data over the coming months and quarters will force the Fed to lower rates further. We look for rate cuts in October, December, March, and June, dropping the fed funds target range to 0.75per cent -1.00per cent by the middle of 2020.”

That view is even more aggressive than the futures market, which has 50 basis points of cuts priced in by June.

Central banks in Japan and Canada also meet this week, with talk the former might ease further if only to prevent an export-sapping bounce in its currency.

The shift from safe havens was working to weaken the yen. The dollar was firm at 108.98 yen, having reached its highest in three months, and was eyeing a major top at 109.31.

It fared less well on the euro, which edged up to $1.1097 , and eased back on a basket of currencies to 97.753 .

Sterling firmed after the European Union agreed to a Brexit delay of up to three months, while Prime Minister Boris Johnson lost a vote to force an election on December 12.

The pound was last at $1.2848, well above its low for the month at $1.2193. Spot gold slipped back to $1,492.21 per ounce, and away from last week's top around $1,517. Oil prices wee pressured by signs of rising US crude stockpiles.

Brent crude futures dipped 1 cent to $61.56, while US crude lost 10 cents to $55.71 a barrel.

Published on October 29, 2019

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