Asia stocks up as weak data hurt Fed hike chances

Australian shares ended the day up 1.1 percent, posting a 0.8 percent loss for the week.

Advertisment Asia traded mixed on Thursday amid lingering uncertainty over key central bank policy meetings next week, while markets in China, Taiwan and South Korea were closed for public holidays.

Also yesterday, United States weekly jobless claims data showed a tightening labour market with subdued layoffs last week, while underlying producer price inflation crept up in August. At the Kansas City Fed’s annual Economic Policy Symposium at Jackson Hole, Wyoming, she said that “by some calculations, the real neutral rate is now close to zero, and it could remain at this low level if we were to continue to see slow productivity growth and high global saving”.

“Anyone 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”.

“It’s no surprise to see reasonable buying in the short-to medium-duration USA treasuries, while the longer end of the curve hardly moved”, he said. The odds of a December hike rose back above 50 percent on Friday after the consumer inflation data. Several Fed officials have recently suggested the economy is almost ready for higher rates, raising expectations for a September hike, but Fed Governor Lael Brainard surprised many with a cautious approach in a speech earlier this week.

Given the November policy review is days before the USA presidential election, December is the only real option if the Fed passes this month.

The difference between what investors demand to hold 10- or 30-year government bonds compared to short-term 2-year debt has been climbing sharply, but yields fell broadly after Thursday’s lackluster retail sales data. The euro was steady at $1.1246.

Both central banks will hold policy meetings next week.

Despite the widespread criticism of the negative interest rate policy from Japanese banks and insurers, the article said that “the BoJ policy board is expected to conclude in the review that the benefits of the negative rate announced in January outweigh the side effects”.

The largest central banks have a good reason to keep monetary policy loose.

The dollar index, which tracks the greenback against a basket of six major peers, remained steady.

The Dow Jones industrial average was up 200.65 points, or 1.11 percent, to 18,235.42, the S&P 500 gained 23.57 points, or 1.11 percent, to 2,149.34, and the Nasdaq Composite added 77.71 points, or 1.5 percent, to 5,251.48.

“We see this magma eventually “erupting” as a result of improved external conditions via higher oil prices and the combination of a hawkish fed and strong macro”, according to its Japan Investment Strategy Global Research Report. That followed gains on Thursday of as much as 2.5 per cent as renewed risk appetite stemmed a two-day rout.

Brent crude limped up 0.6 per cent to $46.11 a barrel after dropping 2.6 per cent on Wednesday when data showing large weekly builds in US petroleum products offset a surprise draw in crude stockpiles. Wall Street’s fall last week was its biggest since February, while the “fear index” gauge of usa stock market volatility nearly doubled and oil prices have slumped 8 percent. The U.K.’s FTSE 100 Index advanced by 0.9 percent, the German DAX Index rose by 0.5 percent and the French CAC 40 Index inched up by 0.1 percent.