SINGAPORE, Jan. 26 (Reuters) – Asian stocks rose to a new seven-month high on Thursday, with Hong Kong stocks catching up to gains in other markets as trading resumed after the three-day Lunar New Holiday.
MSCI’s broadest index of Asia Pacific stocks outside Japan (.MIAPJ0000PUS) climbed 0.56% to 555.81. Hong Kong’s Hang Seng Index (.HSI) was 1.6% higher.
However, Japan’s Nikkei (.N225) was down 0.25%.
Trade was thin on Thursday, Australia was closed for a holiday and certain parts of Asia, including China, were still out for the Lunar New Year.
Traders betting that the US Federal Reserve will soon ease its aggressive rate hike policy received a boost after the Bank of Canada on Wednesday became the first major central bank to announce that it would likely postpone further hikes for the time being.
After a series of super-sized rate hikes last year, the US Federal Reserve is now largely expected to raise rates by a smaller 25 basis points next week if there are signs of inflation cooling.
“Today’s release of US GDP will be critical in gauging whether market expectations shifting in favor of a soft landing rather than a recession can hold,” Saxo strategists said in a note to clients.
The prospect of a less aggressive pace of monetary tightening has fueled expectations of a so-called soft landing – a scenario in which inflation eases amid weakening but resilient economic growth.
But weak corporate earnings so far have reignited concerns about the economic impact of the Fed’s restrictive policies and the S&P 500 (.SPX) ended lower overnight.
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Investors’ attention will also turn to next week’s meetings of the Bank of England and the European Central Bank, with traders looking for clues as to when central banks are likely to start easing.
In the foreign exchange market, the dollar index, which measures the US currency against six major rivals, stood at 101.57, not far from the eight-month low of 101.51 it hit last week.
The Japanese yen rose 0.32% to 129.19 per dollar, while the pound last traded at $1.2407, up 0.06% on the day.
The 10-year Treasury yield fell 1.7 basis points to 3.445%, while the 30-year Treasury yield fell 2.2 basis points to 3.602%.
A closely monitored portion of the US Treasury yield curve that measures the difference between two-year and ten-year Treasury yields, viewed as an indicator of economic expectations, was -68.8 basis points. The reversal of this curve has predicted eight of the last nine recessions, analysts said.
The yield on two-year US Treasury bills, which generally move in line with interest rate expectations, fell 0.6 basis points to 4.131%.
Oil prices rose as US crude inventories rose less than expected, with US West Texas Intermediate (WTI) crude rising 0.42% to $80.49 a barrel and Brent to $86.24, up 0.14% on the day itself.
Gold prices hit a nine-month high on Thursday, with a spot gold flat at $1,946.73 an ounce after hitting the highest level since April 2022.
Reporting by Ankur Banerjee; Edited by Edwina Gibbs
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