Asian stocks rose on Friday, boosted by news of possible progress between China and the United States on an audit agreement, while traders looked forward to a speech by Federal Reserve Chairman Jerome Powell on the path to a rate hike later in the day.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6% in early Asian trade, helped by Hong Kong-listed Chinese technology shares that rose 1.3%.
Alibaba’s Hong Kong shares rose 4%.
This helped the Asian index gain 0.4% for the week.
The Wall Street Journal reported Thursday that Washington and Beijing are nearing an agreement that would allow U.S. accounting regulators to travel to Hong Kong to review the audit records of Chinese companies listed on U.S. exchanges.
Hong Kong’s Hang Seng rose 0.7%, Japan’s Nikkei rose 0.9% and South Korea gained 0.5%.
Stocks rose overnight on Wall Street and U.S. Treasury yields fell as investors digested comments from Fed officials who continued to say they would raise rates and keep them there until inflation is squeezed out of the economy.
The S&P 500 rose 1.4% and the Nasdaq gained 1.67%, led by gains in Nvidia and other technology stocks.
“So it’s a safe bet that Powell’s speech will take a similar turn today,” said Robert Cornell, regional head of research for Asia Pacific at ING.
“If so, the most likely market reaction will be rising yields on both the front end and back end of the yield curve, a sell-off in stocks and a strengthening dollar as markets appear to be positioning themselves for a more favorable set of comments. .”
Investors have reduced expectations that the Fed may lean toward a slower pace of rate hikes as U.S. inflation remains at 8.5% year-on-year, well above the Fed’s 2% target. But Powell’s speech, due on Friday, will be closely watched for signs that the economic slowdown could change the Fed’s strategy.
Interest rate futures now suggest a 60% chance of a 75bp Fed hike. in September.
“The Jackson Hole experience in 2021 will make the Fed chairman wary of making the same mistake twice. That in itself argues against his messaging being too forward-looking or making a mistake,” said Alan Raskin, macro strategist at Deutsche Bank.
“However, markets have largely priced this in, creating the risk of a small, short-term, buy-the-rumor, sell-the-fact rally in tech bonds and easing equity trading.”
In foreign exchange markets, the dollar was practically unchanged against a basket of major currencies.
The commodity-exposed Australian and New Zealand dollars fell 0.4% against the greenback after a strong rebound the previous day.
The yield on the benchmark 10-year Treasury note edged up slightly to 3.0425% from 3.024% the day before in the US at the close.
The two-year yield, rising on traders’ expectations of a Fed rate hike, hit 3.3803%, compared with 3.374% in the US at the close.
Oil prices recovered slightly on Friday after falling about $2 a barrel in the previous session on a possible return to sanctioned Iranian oil exports and concerns over rising interest rates in the United States.
Brent crude rose by 0.5% in early Asian trading to $99.87 per barrel, while US crude rose by a similar rate to $96.01 per barrel.
Gold was slightly lower. Spot gold traded at $1,755.4698 per ounce.