Asia equities buoyed by US rate rise expectations

Thursday 02.15 GMT

Overview

Stocks across Asia advanced on Thursday, buoyed by growing expectations that the Federal Reserve would lift interest rates next month and another set of record highs for Wall Street, including the Dow Jones Industrial Average breaking through the 21,000 mark.

Hot topic

Investors have homed in on recent commentary from Fed policymakers that a 25 basis point rate rise at the US central bank’s March meeting. Most notable was William Dudley, the New York Fed president, who said the case for a rate rise had become “a lot more compelling”.

The Fed looks more likely to raise rates regardless of Donald Trump’s ambitions to cut corporate taxes and invest in infrastructure. The odds for a March rate rise now sit at 80 per cent, according to Fed funds futures tracked by Bloomberg.

Growing confidence in the US economic outlook helped Wall Street reach record highs on Wednesday, including the Dow Jones trading and closing above 21,000 points for the first time.

Equities

Japan’s Topix was up 1.2 per cent, while Hong Kong’s Hang Seng gained 0.5 per cent.

Australia’s S&P/ASX 200 was on track to end a five-day losing streak with its best gain since the first trading day of 2017, as mining stocks helped push the index 1.1 per cent higher. Aluminium stocks gained 10 per cent on reports that China planned to curb output at steel and aluminium producers in an effort to cut winter smog.

China’s Shanghai Composite was down 0.1 per cent, while the technology-focused Shenzhen Composite shed 0.2 per cent.

Forex

The US dollar index was up 0.1 per cent, having jumped 0.7 per cent on Wednesday as the chances of a Fed rate rise improved. It was the greenback’s best one-day gain since early January.

That was keeping pressure on global currencies. Japan’s yen was 0.3 per cent weaker at ¥‎114.07 per dollar, eyeing a four-day losing streak that would be its longest since the week of the US election in November.

The euro was down 0.2 per cent, while the British pound shed 0.1 per cent.

The Australian dollar was down 0.2 per cent as data showed the nation’s trade surplus narrowed by more than economists expected during January, somewhat in contrast to more recent data showing the economy to be in overall good health.

Commodities

Oil prices were mixed on Thursday. In Asia, Brent crude was fractionally higher at $56.36 a barrel, while West Texas Intermediate was down 0.2 per cent at $53.76.

Gold was down 0.3 per cent at $1,246.21 an ounce.

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