Most Asian shares extend rally, markets await UK inflation data

Asian stocks were mostly higher on Wednesday, with US corporate earnings supporting sentiment while traders waited for UK inflation data later in the day for clues as to how tightening central banks need to be to fight inflation.

MSCI’s broadest index of Asia-Pacific stocks outside Japan edged up 0.2%, but further gains were capped by modest declines in Chinese stocks. China’s mainland blue chips lost 0.2%, while Hong Kong’s Hang Sang index fell 0.1%.

Elsewhere, stocks followed Wall Street higher. Japan’s Nikkei rose 0.4%, Australia’s resource-intensive stocks rose 0.4%, while South Korea rallied 0.5%.

US S&P 500 futures were up 0.8% and Nasdaq futures were up 1.3%. Netflix Inc reversed the subscriber losses that plagued its stock this year and forecast more growth going forward, sending shares up 14% in after-hours trading.

Better-than-expected quarterly results from Goldman Sachs Group Inc, Johnson & Johnson and Lockheed Martin helped US equities recover. Both the Dow Jones and the S&P 500 gained 1%.

“Although stocks have managed to find technical support over the past few days and could continue higher…near-term downside risks for equities remain high,” said Shane Oliver, chief economist at AMP Capital.

Chris Turner, ING’s global head of markets, said a quiet week for US data could also mean the dollar correction extends somewhat.

“But a core view that not only the Fed, but other central banks as well, are heading into a looming recession should mean the core dollar bull trend remains intact.”

The US dollar was little changed on Wednesday, hovering near its weakest level in nearly two weeks. However, it hit another fresh 32-year high of 149.34 yen overnight before stabilizing at 149.16 on the risk of intervention by Japanese authorities.

Sterling gained 0.14% against the greenback to trade at $1.1335 after slipping slightly in the previous session.

The UK, which has been rocked by an historic crisis in the government bond market, is due to release September inflation figures later in the day, with annual inflation likely to have been in double digits of 10% for the last month.

That would likely pressure the Bank of England to rise more aggressively. The BoE said overnight it would start selling some of its huge holdings of UK government bonds from November 1, but would not sell longer-duration gilts this year.

“With the rapidly changing view/market prices on what the Bank of England will decide on interest rates on November 2nd, today’s September UK inflation data will be a key reference point,” said Ray Attrill, head of FX strategy at National Australian Bank.

A surprisingly strong inflation report out of New Zealand on Tuesday prompted markets to significantly upgrade the expected pace of tightening for the Reserve Bank of New Zealand.

Oil prices recovered somewhat on Wednesday after falling more than 3% in the previous session on fears of higher US supply and the slowdown in China.

Brent crude futures rose 0.9% to $90.87 a barrel, while US West Texas Intermediate (WTI) crude rose 1.5% to $84.03 a barrel.

US President Joe Biden on Wednesday will announce a plan to sell the last portion of his release from the country’s emergency oil reserves by the end of the year and outline a strategy for replenishing inventories as prices fall, a senior administration official said.

US Treasury yields were broadly stable on Wednesday after falling slightly.

The benchmark 10-year bond yield was little changed at 4.0148%, while the 2-year bond yield stabilized at 4.4435%.

Gold was slightly lower. Spot gold was trading at $1651.09 an ounce. Most Asian shares extend rally, markets await UK inflation data

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