Asian stocks: Asian stocks extend gains on Fed rate-cut bets

Gauges in Japan, South Korea and Australia all rose at the open after the S&P 500 Index rose 0.9% and the Nasdaq 100 climbed 0.6%. Chinese equities will be in focus as Alibaba Group Holding Ltd. shares fell in US trading after its earnings.

Treasuries gave up some of their gains from the prior session, when news of White House National Economic Council Director Kevin Hassett emerged as the frontrunner to be the next Fed chair, helped lift bonds. A Bloomberg gauge of the dollar fell to the lowest level in a week.

Stocks regained momentum as US consumer confidence in November saw its steepest drop since April, and retail sales rose modestly in September, suggesting consumer spending is cooling after months of strong demand. The delayed economic reports out of the US further cemented bets for a Fed cut in December, even after Chair Jerome Powell warned last month that a reduction isn’t a foregone conclusion.

“This bounce is largely emotion and short-covering,” Dilin Wu, a strategist at Pepperstone Group Ltd., wrote in a note. With the US government shutdown disrupting economic releases, “the market is effectively flying half-blind. The sustainability of this rebound ultimately hinges on whether upcoming data confirm the soft-landing narrative.”

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 rate reductions. While the Fed typically adjusts rates in 25‑basis‑point increments, it has on occasion moved by 50 basis points or more.As bets on a rate cut increased, the yield on the benchmark US 10-year slipped to below 4% for the first time in almost a month.

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.”

Investors will also focus on comments from the UK Chancellor of the Exchequer Rachel Reeves as she announces her budget.

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.

Elsewhere in commodities, oil steadied after closing at the lowest in a month on signs of progress toward a peace deal in Ukraine. Gold, which benefits when rates are cut, edged up 0.2%.