Asian Stocks on the Rise: There Are Good Signs

Rise in Asian Stock Markets

Asian stocks are expected to rise on Friday as risk sentiment improves. The easing of tensions between Washington and Beijing has created a positive atmosphere among investors. Treasury bonds fell, and oil prices stabilized ahead of U.S. inflation data.

Stocks in Australia and futures for the stock indices in Japan, Hong Kong, and mainland China rose. The S&P 500 increased by 0.6%, while the Nasdaq 100 rose by 0.9% and the regional Euro Stoxx 50 gained 0.5%. These increases came after declines in the previous session. Stocks of Intel Corp rose in after-hours trading following a positive corporate report, leading to small gains in U.S. futures on Friday morning.

Treasury bonds ended a three-day rise, with yields increasing across the yield curve; the 10-year bond yield reached 4%, rising by five basis points. The dollar remained mostly unchanged, while gold prices fell. Oil prices declined slightly after the largest single-day increase in four months, as the U.S. sanctions on Russia's leading oil producers threaten global supply.

The rise in U.S. stocks stemmed from the White House's announcement that President Donald Trump would meet with China's President Xi Jinping on October 30. This was viewed as a positive development in the trade war between the world's two largest economies. Additionally, the Trump administration's consideration of support for quantum computing to increase competition with China triggered a rally in the sector.

Market movements reflect the expectation that Friday's inflation data will not affect overall optimism. According to Mark Hackett, while institutional investors are critical of valuations, their strategies of buying at low prices have led even the most pessimistic investors to question their outlooks.

West Texas Intermediate Oil prices rose to $62, an increase of 5.6%, marking the highest level since the onset of the Israel-Iran conflict on June 13. Recent U.S. oil sanctions indicate a significant policy shift from the Group of Seven price cap strategy, aiming to limit Russia's profits while avoiding disruption to supply or global prices.

Some analysts believe the effects of the oil sanctions are uncertain, but from a market perspective, the spike in momentary brent prices seems likely to increase focus on this issue.

Investors are likely to overlook a persistent sign of inflation in Friday's consumer price index report, as money markets anticipate a rate cut from the Federal Reserve next week.

The September consumer price index data was scheduled for release on October 10 but was postponed due to the U.S. government shutdown. Economists participating in a Bloomberg survey forecasted that the core consumer price index, excluding food and energy, would rise by 0.3% for three consecutive months; this would occur as import tariffs gradually reflect on consumers. The anticipated monthly increase would keep the annual core consumer price index at 3.1%.

Although inflation remains above the Federal Reserve's target, officials are expected to announce the second rate cut of the year due to a fragile labor market. The data release on Friday is significant as it represents one of the few economic data points we may see due to the government shutdown, says Emily Bowersock Hill, founding partner of Bowersock Capital Partners. However, she notes that the consumer price index to be released on Friday is unlikely to have a significant impact on next week's Fed decision as the Federal Reserve is likely to focus more on the labor market.

Ulrike Hoffmann-Burchardi indicates that Federal Reserve rate cut expectations, durable earnings growth, and artificial intelligence investment spending support the view that the stock bull market will continue to grow. Additionally, she believes it is important to have a sufficient position in U.S. stocks and that investors should diversify their portfolios. Concerns about potential setbacks in U.S.-China relations or the sustainability of the artificial intelligence-focused rally may trigger volatility.