Stocks in Asia Rise, Dollar Drops on Dovish Fed: Markets Wrap – Bloomberg

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Asian equities advanced after U.S. stocks hit record highs, while the dollar maintained losses after minutes of last month’s Federal Reserve meeting showed there remains a strong degree of caution over the timing of future interest-rate increases.

Japanese stocks extended gains, with the Nikkei 225 Stock Average trading at the highest level since 1996, following a fresh S&P 500 Index record. Equities also rose in South Korea, Australia and Hong Kong. Treasuries were steady after the release of the minutes from the Sept. 20 policy meeting. Investors still expect borrowing costs to rise this year, with market-implied odds of a U.S. rate hike by year-end remaining at about 75 percent, based on January 2018 fed fund futures. The euro remains on course for a strong week as the immediate threat of Spain’s breakup over Catalonia’s independence bid receded.

Fed officials debated hard last month over whether forces holding inflation down were persistent or temporary, with several policy makers looking for stronger evidence of price gains before supporting a third interest-rate increase this year. For a more detailed look at the discussion, click here.

While markets remain tilted toward betting on another hike this year, the path for 2018 remains the subject of much debate as the Fed’s balance sheet reduction and any decrease in bond purchases from the European Central Bank reduces new levels of liquidity. In Japan, where that wash of money has helped propel equities, the Bank of Japan is expected to keep its loose monetary policy.

The selection of Fed Chair Janet Yellen’s replacement is also coming more into focus. Trump is meeting this week with Stanford University economist John Taylor, who is on the shortlist of people under consideration to next lead the Fed, three people familiar with the matter said.

Meanwhile, President Donald Trump said his tax plan would simplify the tax code and save money for millions of U.S. businesses and families as he used a speech to truck drivers in Pennsylvania to counter criticism of the proposal.

Terminal subscribers can read more in our Markets Live blog.

What’s coming up this week:

  • Earnings season begins for major U.S. banks, led by JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co.
  • The active Atlantic hurricane season will probably figure prominently in U.S. data on retail sales and consumer prices.

Here are the main moves in markets:

Stocks

  • Japan’s benchmark Topix index added 0.4 percent as of 12:45 p.m. in Tokyo, touching the highest since July 2007. The Nikkei 225 was up 0.5 percent, set for the highest level since November 1996.
  • Australia’s S&P/ASX 200 Index climbed 0.2 percent, while South Korea’s Kospi index rose 0.3 percent.
  • Hong Kong’s Hang Seng Index advanced 0.3 percent and China’s benchmark fluctuated.
  • Futures on the S&P 500 Index were little changed. The underlying gauge rose 0.2 percent on Wednesday.
  • The MSCI Asia Pacific Index rose 0.3 percent.

Currencies

  • The Bloomberg Dollar Spot Index edged lower, extending losses into a fifth day.
  • The yen was slightly firmer at 112.36 per dollar.
  • The euro was at $1.1875, up more than 1 percent again the greenback this week.
  • The Turkish lira strengthened 1.7 percent. The U.S. ambassador to Turkey said the two countries are discussing ways to end a visa suspension that sparked a spat, roiling markets.

Bonds

  • Australia’s 10-year bond yield fell one basis point to 2.81 percent.
  • U.S.’s 10-year yield lost one basis point to 2.34 percent.
  • Spain’s 10-year yield fell six basis points to 1.64 percent Wednesday.

Commodities

  • West Texas Intermediate crude fell 0.5 percent to $51.06 a barrel after rising 0.8 percent on Wednesday.
  • Gold was up 0.2 percent to $1,294.56 an ounce, extending this week’s advance.