Asian shares inched higher as traders await key US inflation data for clues on whether the Federal Reserve will cut or hold interest rates next week. The dollar snapped a three-day gain.
South Korean equities rose for a second session, continuing a recovery after last week’s short-lived martial law event that thrust the country into political turmoil. Stocks in Hong Kong and mainland China advanced as an annual economic meeting begins in Beijing on Wednesday.
The greenback weakened against most Group-of-10 peers in the runup to American consumer price index data. S&P 500 contracts were little changed on Wednesday.
Wednesday’s CPI will offer Fed officials another look at inflation ahead of their next meeting. Swap trading projects about an 85% chance of a quarter-point rate reduction this month. Meanwhile, China’s two-day Central Economic Work Conference is expected to map out policies for next year, with traders emboldened stimulus signals from top leaders.
Asian markets and China are “positioning for the incoming Trump administration,” said Kieran Calder, head of equity research for Asia at Union Bancaire Prive. “The PBOC move to a ‘moderately loose’ from ‘prudent’ policy stance could signal more measures to come from the CEWC.”
China may raise its budget deficit to the highest in three decades and make the deepest interest-rate cuts since 2015, according to economists. At least seven Chinese brokerages forecast that next year’s fiscal deficit target could reach 4% of gross domestic product, the widest since a major tax reform in 1994. Beijing has historically kept its budget deficit ratio at or below 3%.
With little follow-through from China’s politburo announcements, “it may be a case of once bitten, twice shy for investors, who are becoming more skeptical and less willing to buy into stimulus, given the lack of follow through with past policy promises,” said Kyle Rodda, a senior market analyst at Capital.com.
Treasury 10-year yields were little changed at 4.22%.
Meanwhile, the bid by Nippon Steel Corp. to buy United States Steel Corp. looks to be entering its endgame, with President Joe Biden to formally block the $14.1 billion sale on national security grounds once the deal is referred back to him later this month, people familiar with the matter said.
Oil gained ahead of key US inflation data and a monthly report from OPEC that will provide a snapshot on the market.
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