(Bloomberg) — Asian stocks followed Wall Street higher this week as traders awaited a slew of interest rate decisions from central banks, including the Federal Reserve.
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The region's main stock indexes rose, with Australian and Japanese stocks also rising. Hong Kong stocks opened lower amid volatility in mainland China stocks following weak retail sales data on Monday, indicating weak market momentum. The move followed strong trading on Wall Street, with the Nasdaq 100 rising more than 1% to a new record high.
All eyes will be on a number of central bank policy decisions scheduled for this week, including in the US and Japan. Sentiment in the U.S. is relatively positive, with the Federal Reserve's widely expected quarter-point rate cut on Wednesday expected to provide fresh support and widen stocks' gains. The yen fell above the 154 yen level against the dollar overnight.
“This week is probably the last active week of the year,” said Wong Kok Hung, head of institutional equity sales and trading at Maybank Securities. “A rate cut is almost priced in for the Fed, and it's also almost certain that the Bank of Japan will maintain the status quo.We therefore expect US and Japanese stocks to be well supported ahead of these important decisions. ”
The yen stabilized after six days of declines as traders awaited the Bank of Japan's policy decision this week. Based on swap market pricing, traders are pricing in a less than 20% chance of a rate hike in December.
The Bloomberg Dollar Index was little changed Tuesday. The yield on the 10-year US Treasury note was unchanged at 4.40%.
Australian consumer confidence fell in December as sustained domestic inflation and rising interest rates, as well as turmoil overseas increased household uncertainty about the economic outlook.
In the U.S., traders will be parsing the latest economic data. Data on Monday showed that U.S. service provider activity is expanding at the fastest pace since October 2021. Meanwhile, New York state's factory activity index suffered its biggest decline since May of last year.
The main focus remains on Wednesday's Fed decision, with policy announcements in Japan, Scandinavia and the UK expected to follow this week. Even if we get a “hawkish rate cut” from the Fed, it's because the Fed recognizes the underlying strength of the economy, which means the rally in U.S. stocks could continue to widen, according to BlackRock. said Tony DeSpirito, Global Chief Investment Officer. He spoke about fundamental stocks on Bloomberg TV.
