SYDNEY – Asian shares rose on Friday, buoyed by a pullback in the dollar and hopes for stimulus from Beijing, while markets digested hawkish comments from the U.S. Federal Reserve chief and the European Central Bank on the rate hike path ahead.
Cautious optimism is set to continue in European markets, with the regionwide Euro Stoxx 50 futures last up 0.3 percent, German DAX futures rising 0.2 percent and FTSE futures FFIc1 0.4 percent higher.
Wall Street’s main indexes posted modest gains after heavy selling earlier in the week. S&P 500 futures rose 0.5 percent and Nasdaq futures were up 0.7 percent, in a sign of improved risk appetite as markets stabilized.
Fed Chair Jerome Powell said on Thursday the bank is “strongly committed” to controlling inflation but hopes it can do this without the “very high social costs” involved in past inflation fights.
“There is still a lot of tightening to come, but I guess the Fed is getting closer to the top, so we will probably see some easing in the pace of hikes, if not in this month’s meeting, maybe in the subsequent meetings,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.
“Markets are sort of in this in-between zone where interest rates are going up but economic conditions are still OK. That could change if we slide into a recession and then share markets would have another meltdown.”
U.S. rate futures have priced in an 84 percent chance the Fed will hike by another 75 basis points at this month’s meeting, which would increase the Fed funds rate to a 3 percent-3.25 percent range. That it up from a 77 percent probability a day earlier.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.4 percent on Friday, driven by a 2.5-percent jump in Hong Kong’s Hang Seng index and a 1.2-percent advance in China’s bluechips. The Asian index was headed for a small dip of 0.2 percent for the week.
China’s consumer and producer prices rose less than expected in August, data showed on Friday, fanning hopes for more stimulus from Beijing as the economy wobbles.
Japan’s Nikkei gained 0.6 percent.
The ECB raised rates by a record 75 basis points and signaled further hikes to fight inflation, even as the bloc’s economy is heading for a likely winter recession.
That sent euro zone government bond yields soaring and supported the euro. Germany’s two-year bond yield climbed to its highest since 2011. The euro gained 0.7 percent to $1.0069, remaining above parity with the U.S. currency.
The dollar stumbled 0.6 percent against a basket of major currencies.
For the week, though, it has surged 2 percent against the rate-sensitive yen. The Japanese currency has been a victim of the dovish monetary stance from the Bank of Japan, in contrast with rate hikes elsewhere.
U.S. Treasury yields were largely steady after climbing in the previous session. The yield on benchmark 10-year notes stood at 3.2982 percent, compared with the previous close of 3.2920 percent.
Oil prices gained, with U.S. crude advancing 0.6 percent to $84.11 a barrel while Brent crude surged 0.9 percent to $89.95 per barrel.
Britain’s new leader, Liz Truss, on Thursday announced a cap on soaring consumer energy bills for two years to cushion the economic shock of the war in Ukraine.
Gold was slightly higher. Spot gold was traded at $1721.35 per ounce.