Asian stocks rose as China’s largest banks reportedly prepare to cut interest rates and investors speculate that the Federal Reserve is nearing the end of its tightening campaign.

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Hong Kong equities extended gains into a third day as they opened one percent higher Tuesday, while mainland China shares also climbed and other benchmark indexes in the region advanced. News that Chinese state-owned lenders will reduce rates on the majority of the nation’s outstanding mortgages, as well as on deposits, boosted sentiment.

Investors may be starting to take into consideration that policy responses coming out of China focus on the nation’s long-term growth, according to Catherine Yeung, investment director at Fidelity International. “If we do see these reforms work, from a top-down perspective, it could actually really see sort of a floor for the markets,” she said on Bloomberg Television.

US equity futures were little changed in Asian trading. American shares had climbed the most since June on Tuesday and bond yields retreated after job openings fell by more than expected, offering fresh evidence that labor demand is slowing in the world’s largest economy, taking pressure off the Fed. Separate data showed consumer confidence dropped amid souring views on jobs, higher borrowing costs and lingering inflation.

The US economic data triggered lower wagers in swap contracts for a Fed hike in 2023, and a greater chance of a policy pivot in the first half of 2024. Traders also brought forward bets on the expected start of rate cuts to June from July of next year.

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Treasuries steadied, with the policy-sensitive two-year yield hovering at around 4.9 percent after sinking 15 basis points Tuesday. Yields on government bonds in Australia and New Zealand fell Wednesday.

“With markets ready to pounce on softer US data, any sign of weakness is likely to weigh further on yields and the US dollar,” said Matthew Simpson, a senior market analyst at City Index. “That could be great for equity market sentiment.”

Nearly 90 percent of the S&P 500 companies rose as the gauge closed just shy of 4,500. A rally in megacaps like Tesla Inc. and Nvidia Corp. sent the Nasdaq 100 up more than two percent.

A gauge of dollar strength rose and major currencies weakened against the greenback.

The crypto space changed course and erased earlier gains. Bitcoin had jumped more than six percent in the previous session as a US court ruling potentially paved the way for the country’s first Bitcoin exchange-traded fund.

In commodities, West Texas Intermediate rose for a fifth day, set to match the winning streak last seen in March, on signs of tighter market. Gold steadied after rising to the highest since early August on easing Fed rate hike bets.

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First Published:Aug 30, 2023 8:42 AM IST