Stocks Rise as Fed Rate-Hike Bets Ease, Yen Gains: Markets Wrap

(Bloomberg) — Asian stocks and currencies rose as investors pared bets on a Federal Reserve interest-rate hike this month, weakening the dollar. The yen strengthened.

MSCI’s Asia Pacific equities gauge climbed 0.6%, boosted by Fed Governor Christopher Waller’s comments that he would support keeping rates steady if price pressures continued to ease. Swaps priced roughly even odds of a quarter-point hike in September, down from about 70% earlier this week.

A Bloomberg gauge of the dollar steadied after falling to its lowest since May. An index of Asian currencies climbed to levels last seen in October 2024. Treasuries and gold held their gains from Thursday.

Attention in Asia was once again on the yen, which strengthened about 2% Thursday, reversing a month of gradual decline. Traders lifted bets on Bank of Japan rate hikes and remained vigilant to the risk of official action to further boost the currency. The currency traded at about 156 per dollar, having climbed to as high as 155.30 in the prior session.

Stocks and bonds drew support from Waller’s comments after yields surged globally to multi-decade highs earlier this week, as rising oil prices and Chair Kevin Warsh’s hawkish stance fueled expectations for a Fed rate hike. The rout also reflected demands for greater compensation amid years of heavy government spending, persistent price pressures and a wave of corporate borrowing to finance the artificial-intelligence buildout.

The comments “are very meaningful because they might have changed the or tilted the balance of next Fed policy decision,” Suresh Tantia, UBS Global Wealth Management Head CIO Asia Equity Strategy, said on Bloomberg TV. “At this point of time we are watching two key things, one is the nonfarm payrolls data coming on Friday, and the next inflation data. They are likely to decide whether Fed moves in the next meeting or not.”

In other corners of the market, Brent crude rose toward $96 a barrel, on course for a gain of more than 7% over the past five sessions, as renewed US-Iran hostilities this week heightened concerns about disruptions to energy flows. Gold was steady near $4,480 an ounce ahead off the US payrolls release.

Bitcoin traded near the $81,000 mark, while the rate-sensitive two-year Treasury yield held at 4.34% after declining in the previous session following the Fed governor’s remarks.

Waller said he was willing to support “holding the policy rate” at its current level if inflation continued moving toward the Fed’s 2% target. That gauge — the price index for the personal consumption expenditures component of US GDP — was 3.7% in July, down from 4.1% in May.

Attention now turns to Friday’s nonfarm payrolls report, with markets increasingly leaning toward a hold, though that view could shift if inflation proves stickier than expected.

“We repeat our call that the Fed is more likely to hold than hike in September, though we think it is close and will indeed turn on the next set of inflation data,” said Krishna Guha, head of central bank strategy at Evercore ISI.

Back to the yen, the rebound from a fall to 160 earlier this week underscores market jitters ahead of the BOJ’s Sept. 18 policy decision, when the central bank is widely expected to raise rates. The Bank of Japan could raise interest rates at three consecutive meetings through December in an extreme scenario where yen weakness persists, according to Nomura Securities Co.

The currency’s gains in New York trading, wrapped up its best day since Tokyo and Washington entered the market to prop up the yen just over a month ago.

“It appears the BOJ will pull the trigger and hike in September but then open the door to a potential pick up in the pace of hiking,” said Paresh Upadhyaya, a strategist at Pioneer Investments. “We are finally seeing a follow through to intervention by some meaningful expectation on the policy front.”

Corporate Highlights:

Volkswagen AG’s supervisory board backed a sweeping overhaul that calls for 50,000 additional job cuts, far fewer models and a smaller industrial footprint. Anthropic PBC is set to finalize an expansion of its revolving credit facility to $15 billion, according to people familiar with the matter. Lululemon Athletica Inc. lowered its full-year outlook for a second straight quarter OpenAI is releasing a new generation of its technology called GPT-6 that the company is positioning as a key milestone in a push to build so-called artificial general intelligence. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 11:58 a.m. Tokyo time Japan’s Topix fell 0.2% Australia’s S&P/ASX 200 was little changed Hong Kong’s Hang Seng rose 2.2% The Shanghai Composite rose 0.5% Euro Stoxx 50 futures were little changed Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1627 The Japanese yen fell 0.2% to 156.07 per dollar The offshore yuan was little changed at 6.7159 per dollar Cryptocurrencies

Bitcoin fell 0.8% to $80,800.23 Ether was little changed at $2,504.67 Bonds

The yield on 10-year Treasuries was little changed at 4.77% Japan’s 10-year yield declined six basis points to 2.905% Australia’s 10-year yield was little changed at 5.18% Commodities

West Texas Intermediate crude rose 0.5% to $91.80 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.

–With assistance from Abhishek Vishnoi.

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