Asian stocks extended global gains overnight on strong results from regional tech companies and U.S. retailers, while investors were also reassured by Federal Reserve minutes showing a pause in its rate hikes. is scheduled for later this year.
The swing in sentiment left the US dollar wallowing at its lowest level in a month, with the euro hitting its highest level since April 25.
MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 1.5% in early trading, the biggest gain in a week.
It was supported by a 1.2% rebound in resource-rich Australian stocks, a 2.8% jump in Hong Kong stocks and a 0.7% rise in blue chips in mainland China.
The Japanese Nikkei advanced 1.0%.
The Hang Seng Technology Index opened 4.5% higher as first-quarter earnings from Alibaba and Baidu beat expectations.
The United States will not prevent China from developing its economy, but wants it to adhere to international rules, US Secretary of State Antony Blinken said on Thursday.
Wall Street closed sharply higher overnight after an upbeat outlook for retail earnings and waning concerns about overly aggressive interest rate hikes from the Fed buoyed buyers.
The Dow Jones Industrial Average rose 1.61%, the S&P 500 1.99% and the Nasdaq Composite 2.68%.
Bullish advice from retailers such as department store operator Macy’s, discount chains Dollar General and Dollar Tree appeared to offset stark warnings from peers in recent weeks.
“Despite the fact that the five-day gains on Wall St now at and above 4% suggest the collapse has been broken, it should not be mistaken that this is just a relief from earnings – and should not prematurely inspire proclamations of a bull market restart,” analysts at Mizuho Bank said.
Tapas Strickland, director of economics and markets at NAB, said “equities are in the light of Wednesday’s FOMC minutes where it appears markets interpreted them as opening up the possibility of a Fed pause in fourth quarter of 2022, while some note the anticipated loading of the hikes may have tightened financial conditions sufficiently.”
The Fed’s May meeting minutes released Wednesday confirmed two more 50 basis point hikes in June and July, but policymakers also hinted at the possibility of a pause later in the year.
On Friday, the yield on the benchmark 10-year Treasury bill rose slightly to 2.7649% from its U.S. close of 2.758% on Thursday.
It had hit a three-year high of 3.2030% earlier this month on fears that rapid Fed hikes could undermine long-term growth.
The two-year yield, which rises on traders’ expectations of a hike in the fed funds rate, touched 2.4879% from a US close of 2.488%.
“The fall in US Treasury yields in the interim has been correlated with declines in inflation expectations, which had been above 3% over 10 years and are now in the 2.6% zone. Overall , a pronounced stress decompression,” ING analysts said in a note.
Signs of aggressive Fed action could already slow emerging economic growth as well.
Thursday’s data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week as the job market remained tight.
A separate report confirmed that the US economy contracted in the first quarter.
In currency markets, the US dollar fell 0.2% against a basket of major currencies, falling further away from its 20-year highs reached two weeks ago. The euro gained 0.26% against the greenback.
Oil prices dipped slightly at the start of Asian trading after hitting a two-month high in the previous session as investors focused on signs of tight global supply.
U.S. crude fell 0.15% to $113.92 a barrel, while Brent crude fell 0.1% to $117.27 a barrel.
Gold was slightly lower. Spot gold was trading at $1,848.79 an ounce.
Australian Associated Press