Asian stocks rebounded from its longest losing streak since May on Friday (Sept 16), after weaker-than-anticipated United States data triggered a delay in investor expectations for a USA interest-rate increase, spurring a rally in risk assets.
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MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent, but it was headed for a loss of 2.4 percent for the week.
Elsewhere, the Australian dollar inched up 0.1 percent to $0.7520 after posting a 0.7 percent gain on Thursday. New Zealand’s S&P/NZX 50 Index advanced 0.6 per cent. Markets are shut for holidays on Friday in China, Hong Kong, Taiwan and South Korea.
But markets were downgrading that possibility following data showing lackluster U.S. retail sales in August and tepid wholesale inflation.
“Anyone still left calling for a September hike next week from the Federal Reserve must be feeling a bit hot under the collar after further signs of economic vulnerabilities”, Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.
Indeed the most conspicuous feature of the current jitters in bond markets is that they have not affected the most sensitive and closely watched part of the sovereign debt markets: the short end of the US Treasury curve which reflects market expectations of the pace of rate hikes. The report also showed that in the 12-months through August, the CPI increased 1.1 percent, up from 0.8 percent in the year through July.
Core consumer price inflation, which excludes volatile food and energy items, edged marginally higher in August to be 2.3 per cent higher over the year, due to rising medical costs, data published on Friday showed. The Fed is expected to hold off on an interest rate hike until December, though more members of the Federal Open Market Committee clearly favor raising rates, so the Fed forecast on both rates and the economy will be important.
Sources told Reuters on Wednesday that the BOJ will consider making negative interest rates the centerpiece of future monetary easing, underscoring growing concerns over the limits to the BOJ’s stimulus efforts, as more than three years of aggressive bond buying is draining market liquidity. “It’s just right to keep the Fed on the sidelines and keep interest rates right where they are”, said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
In Commodities Markets oil prices fell on Friday on worries that USA rig counts would continue to rise and that returning Libyan and Nigerian exports would stoke a global supply glut. Earlier in the week, the Japanese Yen weakened after reports surfaced the central bank was preparing for a blockbuster stimulus plan including dropping interest rates further into negative territory. The US treasury yields traded at their highest since June, while the Japanese 30-bond yields rose sharply this week.
The Fed’s inflation target is 2 per cent.
Many market players expect the BOJ to indicate a preference for a steeper yield curve to cushion the blow on banks from negative interest rates.
Amid speculation the Bank of Japan will announce additional monetary easing next week, some observers are warning of possible side effects.
In currencies, the dollar was little changed at ¥102.06 after Thursday’s 0.3% loss, and was heading for a 0.6% decline for the week.
The dollar index, which tracks the US unit against a basket of six major rivals, was a touch higher at 95.508, after wobbling in a narrow range this week between a low of 94.935 on Monday and a high of 95.672 on Tuesday.
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The euro was also flat at $1.1243, poised for a 0.1% weekly gain. USA stocks rose, helped by Apple Inc’s best four-day run since 2014 and higher oil prices.
