ASIA extended a global equities rally on Wednesday after another round of tepid US data reinforced expectations that the Federal Reserve will cut interest rates again next month.
A report that US President Donald Trump’s top economic aide was the frontrunner to be the central bank’s next boss added to the risk-on mood as investors rediscovered their mojo after a recent stutter.
Bets that officials will lower borrowing costs at their December meeting have surged this week after a number of key members of the policy board said they backed a third successive cut as fears about the labour market overshadowed still-high inflation.
And a fresh batch of reports on the world’s top economy – some delayed by the government shutdown – provided fresh ammunition to those calling for more easing.
Payroll firm ADP said the four weeks to Nov 8 saw private employers shed an average 13,500 jobs per week, while official figures showed retail sales rose slower in September than August and less than expected.
Meanwhile, the Conference Board’s consumer confidence index dropped to its lowest level in seven months, with shoppers expressing greater worry about labour market conditions and the outlook for household incomes.
Analysts said the reading was particularly a concern ahead of the holiday spending period.
The Labor Department also said wholesale inflation picked up in September but in line with forecasts.
However, the rise was driven by a big jump in goods prices, highlighting the steeper costs that businesses face.
“The shutdown backlog released an avalanche of extremely stale prints: ADP soft, retail sales weaker, Core PPI tame, Richmond Fed grim, consumer confidence dismal,” wrote Stephen Innes at SPI Asset Management.
“None of it is current, none of it is forward-looking. But in a market starving for macro inputs, even freezer-burnt data tastes dovish. Goldman’s economists shaved third-quarter GDP tracking to 3.7 per cent, reinforcing the narrative that growth is cooling right into the December (policy board) window.”
The chances of a more dovish Fed were also given a boost after Bloomberg reported that Kevin Hassett, director of the White House National Economic Council, was considered the leading candidate to take the lead at the Fed when Jerome Powell’s term ends next year.
Hassett is a close ally of the president and Bloomberg said he was seen as someone who would back rate-cut calls by Trump, who has regularly slammed Powell for not taking such action early enough.
“Hassett is viewed as closely aligned with President Trump’s preference for lower interest rates, and his appointment would likely reinforce the administration’s push for easier policy,” said National Australia Bank’s Rodrigo Catril.
Wall Street’s three main indexes enjoyed a third day of healthy gains, and Asia again followed suit.
Tokyo and Seoul gained around two per cent, while Hong Kong, Shanghai, Sydney, Singapore, Taipei and Wellington also chalked up healthy advances.
The gains come after a pullback on trading floors for much of November owing to worries about lofty valuations, particularly among tech firms, with some questioning the wisdom of the vast sums of cash invested in the artificial intelligence sector.
In corporate news, Chinese ecommerce titan Alibaba dropped more than one per cent after reporting a fall in profit linked to consumer subsidies and the building of data centres to deal with its AI ambitions. AFP
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