Thursday, October 28, 2021
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Stocks rise, dollar tightens as inflation pushes rate hike bets

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SINGAPORE – Asian stock markets rose, the dollar fell and longer-term bonds rallied on Thursday as investors saw inflation as a trigger for rate hikes around the world.

MSCI’s broader Asia-Pacific stock index outside of Japan gained 0.4%. Japan’s Nikkei was up 1%.

The Shanghai Composite was slightly softer, while the Hong Kong markets were closed for the holidays.

Overnight figures showed another solid rise in U.S. consumer prices, while minutes from last month’s Federal Reserve meeting showed lawmakers growing concern over inflation and a deal. general to start reducing asset purchases soon.


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Traders responded by anticipating rate hike expectations, but reducing the projected peak. Fed fund futures anticipated the first hike since late 2022 at a near full price of a 25 basis point rise in September, but prices also suggest rates will hover around 1.5% in five years.

Gold had his best session in seven months.

In the bond market, short-term Treasury yields rose while long-term yields fell, flattening the curve. Longer-term yields also fell in Asia on Thursday and the dollar, which rallied through September, retreated sharply as longer Treasury yields fell and took a breather on Thursday.

“The market continued to advance in the price of the first rate hike while the price of the terminal fee decreased, which we believe is a reflection of the market price in a policy error,” said analysts at TD Securities.


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Overnight on Wall Street, the S&P 500 was up 0.3% and in early Asia trading, S&P 500 futures were also up 0.3%.

Data on Wednesday showed that U.S. consumer prices rose 5.4% year-on-year last month and that rent increases appeared to be gathering momentum, which coupled with high energy costs increases risk. from persistent price pressure.

In a change from the Fed meeting readings over the summer, policymakers were also not described as “generally” expecting inflationary pressures to ease.

Policymakers discussed the timing and structure of the bond purchase reduction and the minutes said that if the decision is made to begin the reduction next month, the process could begin in mid-November or mid-December.


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On Thursday, markets await US producer prices and jobless claims figures, as well as appearances by lawmakers from the Bank of England and the Federal Reserve.


Meanwhile, Singapore’s central bank unexpectedly tightened monetary policy, citing forecasts of higher inflation.

In China, producer prices rose at their fastest pace since the series began in 1996, data showed on Thursday.

In Australia, a drop in employment figures and comments from a central bank official on lagging wages have not derailed the build-up of recent market bets on rate hikes starting next year.

Swap markets have traded around 90 basis points of rate hikes by the end of 2023 despite the Reserve Bank of Australia insisting that hikes are unlikely before 2024.


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Currency markets were fairly quiet Thursday after the dollar’s overnight slide, which was the euro’s steepest decline in five months.

The euro was stable at $ 1.1591 in Asia, while the British pound, Australian dollar and New Zealand dollar maintained Wednesday’s gains, as did the Chinese yuan.

The Singapore dollar hit a three-week high.

In commodities, on Thursday, oil futures stabilized, hovering comfortably above $ 80 a barrel, with US crude at $ 80.55 a barrel and Brent at $ 83.32.

Gold held overnight gains at $ 1,789 an ounce.

The 10-year Treasury yield stood at 1.5525% after falling three basis points overnight and the two-year yield fell marginally to 0.356% after rising 1.8 basis points overnight.

Bitcoin rose 1.5% to $ 58,550, its highest level since May.

(Reporting by Tom Westbrook; Editing by Edwina Gibbs)



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