Asia shares rise on hopes of rate hike slowdown, ECB in focus By Reuters

By Ankur Banerjee

SINGAPORE (Reuters) – Asian equities gained for a third straight day on Thursday, on growing hopes that major central banks could start slowing the pace of interest rate hikes, with the European Central Bank’s meeting later in the day in focus for further clues.

MSCI’s broadest index of Asia-Pacific shares outside Japan rallied 1.24% and a rebounding Hong Kong again led gains.

There were, however, some signs of flagging momentum and European futures indicated stocks were set to decline ahead of the ECB’s rate decision, with markets expecting a 75 basis-point rate hike.

Eurostoxx 50 futures were down 0.28%, while German fell 0.20% and futures were 0.23% lower. U.S. futures rose 0.7%.

The impending ECB decision comes after the Bank of Canada on Wednesday surprised markets when it announced a smaller-than-expected rate rise, weeks after Australia’s central bank made a similar move.

All of this has increased speculation that the Federal Reserve may soon slow its aggressive policy tightening, blunting the dollar’s rally and pushing Treasury yields lower.

“The pivot story from the United States is really beginning to look more plausible,” said ING’s regional head of research Robert Carnell, adding this was driven in part by the move from Bank of Canada.

The market is looking for guidance on the pivot story, Carnell added. “Has the dollar had its day? … We won’t know that until the FOMC meeting.”

The Fed is expected to raise interest rates by 75 basis points again next week although there is some anticipation it will slow the pace of tightening and hike by a half point in December.

Carnell said the Fed’s forward guidance next week will be incredibly important, pointing out that there has been a slight softening of the stance from the central bank on its tightening policy.

ROLLING RECESSIONS

In Asia, Australia’s resources-heavy share index advanced 0.5%, while was down 0.3%.

China’s stock market edged lower as bleak industrial profit figure and widening COVID-19 outbreaks weighed on sentiment. Hong Kong’s added 2%, but had come down from the day’s highs as bargain hunters’ enthusiasm ebbs.

Chinese stocks have had a turbulent week, headlined by Monday’s brutal sell-off as global investors dumped Chinese assets, worried that President Xi Jinping’s new leadership team would put ideology before the economy.

In the currency markets, the euro is above $1 for the first time in five weeks and last bought $1.1008. The greenback was on the back foot against most other major currencies, and especially on the yen, with dollar/yen down 0.9% to 145.15.

The greenback’s retreat has come in tandem with a bond rally and lifted commodity prices. was flirting with two-week high it touched on Wednesday.

Oil prices were firm, and held overnight gains, with futures at $95.78 a barrel.

The principal challenge for central banks across the globe is to devise a path of policy that extinguishes inflation, but must also consider the implications for growth and employment, Citi strategists said in a note.

At the country level, Citi expects a series of “rolling recessions” with downturns appearing in the euro area and UK late this year and in the United States in mid-2023.

Earnings reports from Facebook (NASDAQ:) parent Meta Platforms Inc on Wednesday and Samsung Electronics (OTC:) Co Ltd are starting to show signs that the slowdown has arrived.

Quarterly reports from Amazon (NASDAQ:) and Apple (NASDAQ:) due on Thursday will provide further detail on how companies are faring and framing their outlooks.

Embattled Credit Suisse on Thursday also outlined a long-awaited overhaul that will raise capital and separate out its investment bank, along with a $4 billion loss.