Stocks in Asia rose after a rally in Big Tech pushed US stocks to their longest streak of gains in two years, with investors shrugging off the latest attempts from Federal Reserve speakers to tone down Wall Street’s optimism.

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Shares climbed in South Korea and Australia after the S&P 500 advanced for a seventh day, while Japan’s equity benchmark slipped in early Asia trading and Hong Kong futures remained flat. Treasuries steadied after bets on a Fed pivot next year sent bond rates sharply down, with the 10-year yield dropping below 4.6%. The moves came after some Fed officials emphasized that bringing inflation fully down to the 2% goal is their main focus.

Oil fell to a three-month low as a forecast drop in US gasoline consumption added to a growing array of indicators, including weak trade data from China, suggesting the demand outlook is worsening.

“Lower energy prices temper the inflationary pulse and allow for a revision in rate expectations,” Capital.com market analyst Kyle Rodda wrote in a note. “That takes pressure off equities in the short term and signals pressure on corporate profits.”

Australia’s 10-year yield declined for a fifth session, a day after the central bank lifted its cash rate to a 12-year high, while signaling a higher hurdle to further policy tightening that pushed the local currency lower.

Global equities are poised for a double-digit rally in 2024 if the Fed pivots its monetary policy and allows the economy to avoid a recession, according to HSBC Holdings Plc strategists. The S&P 500 rose in price an average 13% in the nine months after the last rate hike in the past three decades, said Sam Stovall, chief investment strategist at CFRA and author of “The Seven Rules of Wall Street.”

“The recent move in stocks is consistent with our view that investor pessimism had been overdone,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “While we continue to see near-term headwinds for equities, we believe conditions are in place for positive total returns over the next six to 12 months.”

Fed Bank of Minneapolis President Neel Kashkari said policymakers have yet to win the fight against inflation and they will consider more tightening if needed. His Chicago counterpart Austan Goolsbee said officials don’t want to “pre-commit” decisions on rates.

Several of the US central bank’s more hawkish policymakers signaled that the cumulative tightening of financial conditions since July — with yields on 10-year Treasury bonds up more than 100 basis points — could have a dampening effect on the economy, though they want more time to see if it will last. Fed Governor Christopher Waller called the run-up in yields an “earthquake” for the bond market.

“We’ll be especially attentive to policymakers’ thoughts around the recent shifts in financial conditions and what a nearly 50 basis-point drop in 10-year yields and a strong rebound in equity valuations could mean for the path of monetary policy,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets.

The US dollar strengthened for a second day on Tuesday. Gold was little changed after dropping to a two-week low.

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First Published:Nov 8, 2023 6:51 AM IST