(Oct 24) :\u00a0Asian stocks were set to open higher Friday as risk sentiment improved on signs of de-escalating tensions between Washington and Beijing. Treasuries fell and a spike in oil prices steadied ahead of US inflation data.<\/p>\n
Shares in Australia and equity-index futures for Japan, Hong Kong and mainland China all climbed, tracking gains on Wall Street on Thursday. The S&P 500 rose 0.6%, the Nasdaq 100 climbed 0.9% and the region-wide Euro Stoxx 50 rose 0.5% \u2014 each rising after declines in the prior session. Shares in Intel Corp climbed in post-market trading after a\u00a0bullish corporate report, supporting minor gains in US futures early Friday.<\/p>\n
Treasuries snapped a three-day rally as yields rose across the curve, with the 10-year climbing five basis points to 4%. The dollar was little changed, while gold fell. Oil prices edged lower after the\u00a0biggest one-day\u00a0gain in over four months, as US sanctions on Russia\u2019s top oil producers threatened global supply.<\/p>\n
Gains for US shares came as the White House said President Donald Trump will\u00a0meet his Chinese\u00a0counterpart Xi Jinping on Oct. 30, a positive development amid a trade war between the world\u2019s two largest economies. The Trump administration is also weighing a\u00a0quantum-computing boost\u00a0in an effort to counter China, spurring an industry rally.\u00a0<\/p>\n
The cross-asset moves reflected optimism that Friday\u2019s inflation reading won\u2019t dent the broad optimism supported by resilient earnings and the potential for supportive news on US-China relations.<\/p>\n
\u201cValuations continue to be the best argument for bears, but the relentless buy-the-dip approach of investors has even the most pessimistic investors questioning their outlook,\u201d said Mark Hackett at Nationwide.<\/p>\n
West Texas Intermediate jumped 5.6% to settle near $62 a barrel on Thursday, the most since the start of the Israel-Iran conflict on June 13. The latest US oil sanctions signaled a major policy turn from the Group-of-Seven price cap strategy that sought to limit Russia\u2019s earnings without disrupting supply or driving up global prices.<\/p>\n
\u201cAs with the trade war, the fallout from the oil sanctions is murky at best, although we expect that from the perspective of the market at least, the kneejerk spike in crude will represent the bulk of the attention devoted to this matter, as it were,\u201d said Ian Lyngen, Vail Hartman and Delaney Choi at BMO Capital Markets.<\/p>\n
Investors will likely look past any evidence of stubborn inflation in Friday\u2019s consumer price index report, as money markets brace for a Federal Reserve rate cut next week.<\/p>\n
The\u00a0September CPI\u00a0report originally slated for Oct. 15 release was delayed due to the US government shutdown. Economists in a Bloomberg survey forecast the core CPI, which excludes food and fuel, to have climbed 0.3% for a third straight month as higher import duties continue to gradually filter through to consumers. The projected monthly gain will keep the annual core CPI at 3.1%.<\/p>\n
Although inflation is stuck above the Fed\u2019s goal, officials are expected to announce their second rate cut of the year because of the fragile labor market.<\/p>\n
Friday\u2019s CPI is important in the sense that it\u2019s one of the few economic data points that we will see given the government shutdown, according to Emily Bowersock Hill founding partner of Bowersock Capital Partners.<\/p>\n
\u201cBut since the Federal Reserve is likely more focused on the labor market, we don\u2019t expect Friday\u2019s CPI to weigh heavily on next week\u2019s Fed decision,\u201d she said. \u201cWe will likely see two more rate cuts this year, in October and December.\u201d<\/p>\n
Prospects for Fed easing, durable earnings growth and AI investment spending support the view that the equity bull market has further room to run, according to Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.<\/p>\n
While it\u2019s important to have adequate exposure to US stocks, she also believes investors should diversify their portfolios.<\/p>\n
\u201cAny setbacks in US-China relations or potential concerns about the durability of the AI-driven rally could trigger bouts of volatility,\u201d she noted.\u00a0<\/p>\n
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