Asian Stocks Set to Extend Gains on Fed Cut Hopes: Markets Wrap

(Bloomberg) — Asian stocks were set for a third day of gains, tracking similar advances on Wall Street as weak US consumer data lifted bets of a Federal Reserve interest rate cut next month.

Equity-index futures pointed to strong starts for Japan and Australia, with a more modest increase for Hong Kong, at Wednesday’s open. In the US, the S&P 500 rose 0.9% and the Nasdaq 100 climbed 0.6% in choppy sessions as Alphabet Inc. threatened Nvidia Corp.’s dominance in the artificial intelligence sector.

Delayed economic reports out of the US further cemented bets for a Fed cut in December, with traders now pricing in a roughly 90% chance. Retail sales rose modestly in September, suggesting consumer spending is cooling after months of strong demand. While wholesale inflation picked up, consumer confidence in November saw its steepest drop since April.

“Downbeat economic data is delivering gains to stock and bond bulls alike, as weaker-than-expected retail sales and consumer confidence numbers coincide with accelerating job losses and rising odds of a December Fed cut,” said José Torres, senior economist at Interactive Brokers.

The latest US economic reports have taken on added weight ahead of the Fed’s December meeting, given the lack of fresh data. Governor Stephen Miran underscored that outlook by reaffirming his belief that the US economy requires substantial interest‑rate reductions. While the Fed typically adjusts rates in 25‑basis‑point increments, it has on occasion moved by 50 basis points or more.

White House National Economic Council Director Kevin Hassett’s emergence as the frontrunner to replace the Fed chair helped drive Treasury yields down, with the 10‑year slipping to 4% for the first time in a month. The dollar slipped 0.3%.

Traders bolstered bets on lower rates over the next year, reflecting the view that a Hassett‑led Fed would deliver the aggressive cuts that President Donald Trump has advocated.

“The argument will be a weaker US dollar, lower front-end rates from May’s meeting onwards and steeper curves,” said Jordan Rochester, a head of macro strategy at Mizuho in London. Hassett is “a credible economist by background, previously working at the Fed as a senior economist, but some may argue his closeness to Trump makes him the patsy.”

In Asia, recent weakening of the yen is increasing the likelihood of the Bank of Japan raising its benchmark rate next month, according to a former executive director of the central bank. The currency hit a fresh 10-month low against the dollar last week and is fueling inflationary pressure via higher import costs.

AI Battle

Alphabet shares jumped 1.6%, moderating earlier gains, after a report that Meta Platforms Inc. was in talks to spend billions on Google’s artificial-intelligence chips. Nvidia shares dropped 2.6%, pulling back from gains it made in Monday’s tech-fueled rally.

“Nvidia’s dominant position is unlikely to be fundamentally threatened in the short-term, but markets are all about forward expectations, and it certainly seems like Alphabet is poised to snatch market share away from Jensen Huang’s empire,” said Chris Beauchamp, chief market analyst at IG.

The rally in Alphabet shares is poised to shake up the rankings of the world’s most valuable companies. A potential changing of the guard comes at a time when the AI industry has come under scrutiny, with stretched valuations causing some volatility.

Elsewhere in commodities, oil fell as signs of progress in peace talks between Ukraine and Russia buoyed expectations that Moscow’s supply will stay online. Gold closed little changed.

Some of the main moves in markets:

Stocks

Nikkei 225 futures rose 1% as of 7:26 a.m. Tokyo time Hang Seng futures rose 0.3% S&P/ASX 200 futures rose 1.1% Currencies

The Bloomberg Dollar Spot Index fell 0.3% The euro was little changed at $1.1571 The Japanese yen was little changed at 156.00 per dollar The offshore yuan was little changed at 7.0825 per dollar The Australian dollar was little changed at $0.6467 Cryptocurrencies

Bitcoin was little changed at $87,086.84 Ether was little changed at $2,928.49 Bonds

Australia’s 10-year yield was little changed at 4.43% This story was produced with the assistance of Bloomberg Automation.

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