04 Oct 2022, 11:54

Asian traders track Wall St up as US data tempers rate fears

HONG KONG, Oct 4, 2022 (BSS/AFP) - Asian markets followed Wall Street higher
Tuesday after weak US factory data sparked optimism that a series of big
interest rate hikes were taking their toll, allowing the Federal Reserve to
ease its foot off the pedal.

The rally in equities was matched by more gains in sterling as traders
welcomed the government's decision to scrap a planned cut in the top rate of
income tax.

Oil also continued to rise on expectations OPEC and other major producers
will slash output this week, having become spooked by a plunge in the
commodity on recession fears.

All three main indexes in New York enjoyed a bumper start to the quarter
after data showed US manufacturing growth slowed more than expected in
September to its weakest in more than two years.

SPI Asset Management's Stephen Innes said: "The positive aspect in the data
is prices paid dropped to 51.7, the lowest print since June 2020, triggering
a mini-risk revival in stocks and a sell-off on the US dollar as US yields
continued to slide.

"In this hawkishly priced risk environment, bad data is considered good news,
as it raises the possibility of a doveish pivot by the Federal Reserve."

But he added that there was a lot more data to come this week, topped by
Friday's US jobs figures, that could alter investors' views, while several
Fed officials remained wedded to their rate hike plan to tame inflation.

Nicole Webb, at Wealth Enhancement Group, told Bloomberg Television that
while the Fed will at some point stop hiking, "how long they hold us or
suspend us there is still in question".

Still, in early trade Tuesday, Asia built on the Wall Street surge.

Tokyo and Seoul were among the leaders, despite news that North Korea had
fired a missile over Japan for the first time since 2017.

Sydney, Singapore, Taipei, Manila and Wellington were also sharply higher.
Hong Kong and Shanghai are closed for holidays.

On currency markets, sterling held its gains against the dollar, which came
on the back of lower US rate hike bets as well as the UK government's
decision to walk back a controversial tax cut.

Ahead of a speech to a conference of the ruling Conservatives, finance
minister Kwasi Kwarteng dropped the proposal, which was part of a big-
borrowing mini-budget that sent shudders through markets.

The UK unit held above $1.13, having last Monday tanked to a record low

The tax cut would have cost about o2-3 billion out of an estimated o72.4
billion worth of debt issuance this year.

But National Australia Bank's Tapas Strickland said the u-turn "is a sign
that the government is responding to market concerns and also to polling
which may mean the new government is not as cavalier as some had feared".

Commodities traders are keenly awaiting Wednesday's monthly meeting of OPEC
and other producers after reports said it is considering a million-barrels-a-
day output cut.

WTI surged more than five percent Monday and Brent was up 4.4 percent,
recovering some of the huge losses suffered in recent months because of fears
about demand caused by an expected recession.

The jump was also helped by the weaker dollar, which makes the so-called
black gold cheaper for buyers using other currencies.

A cut would deal an extra blow to central banks trying to fight decades-high
inflation, which has partly been driven by the spike in crude markets stoked
by Russia's invasion of Ukraine.

But SPI's Innes added OPEC could justify the move by pointing to the recent
drop in prices, which are down about 40 percent from June.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: UP 2.4 percent at 26,840.75 (break)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Pound/dollar: DOWN at $1.1311 from $1.1315 on Monday

Euro/dollar: DOWN at $0.9817 from $0.9822

Euro/pound: UP at 86.79 pence from 86.74 pence

Dollar/yen: UP at 144.77 yen from 144.66 yen

West Texas Intermediate: UP 0.1 percent at $83.74 per barrel

Brent North Sea crude: UP 0.3 percent at $89.15 per barrel

New York - Dow: UP 2.7 percent at 29,490.89 (close)

London - FTSE 100: UP 0.2 percent at 6,908.76 (close)

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