Japan stocks rise as Asian equities gain ahead of key US inflation data

ASIAN stocks gained and bonds steadied after a bruising sell-off as traders awaited a crucial US inflation reading for clues on the path of interest rates, while the US dollar headed for its best month since June.

The MSCI Asia Pacific Index gained 0.8 per cent, with 10 of its 11 industry groups advancing.

Among the main market moves, S&P 500 futures rose 0.1 per cent as at 12.01 pm Tokyo time. The Nikkei 225 futures (OSE) rose 1 per cent, Japan’s Topix climbed 0.9 per cent and Australia’s S&P/ASX 200 gained 1 per cent.

Meanwhile, Hong Kong’s Hang Seng was little changed and the Shanghai Composite advanced 0.3 per cent.

SoftBank, an investor in OpenAI, rose 6 per cent after people familiar with the matter said the artificial intelligence startup sought to raise at least US$30 billion in fresh funding at a US$1.4 trillion valuation.

Bonds remained in focus after yields on the longest-maturity Treasuries reached their highest since 2002 in the New York session.

Yields steadied across the curve after rising earlier this week, as a rally in oil prompted traders to price in further interest rate hikes by the US Federal Reserve.

Brent crude climbed 0.5 per cent to about US$103.10 a barrel, recouping some of the losses from Tuesday (Sep 29).

Crude oil flows from the Middle East are almost back to pre-war levels despite continued risks to shipping, according to JPMorgan Chase.

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Oil prices and US-Iran tensions remain key sources of uncertainty, with markets looking for clearer signs of progress in negotiations after conflicting signals in recent days.

Global bond yields have climbed to multi-year highs as elevated energy costs threaten to keep inflation persistent and reinforce expectations for further Fed interest rate hikes.

“The sell-off in bonds can stop for one of the following reasons: a quick resolution of the US-Iran conflict, a material fall in stock prices driven by a slowdown in hard economic data, or lower earnings and forward guidance,” said Arjun Vij, a fund manager at JPMorgan Asset Management.

Yields on Treasury 30-year bonds rose for a sixth day on Tuesday as investors demanded greater compensation to hold the securities amid concerns about persistent inflation, higher government spending and a surge in corporate borrowing to finance the AI build-out.

Traders are ramping up bets that Treasury yields will keep climbing, raising the risk of an abrupt unwind of those positions on any sign of a marked economic cooling.

Money markets are pricing a series of rate hikes over 2027.

Elsewhere, Chinese property stocks slumped after Beijing rolled out a mortgage subsidy programme that analysts said fell short of expectations.

A Bloomberg gauge of the US dollar steadied, wrapping up its best month since June as the Fed’s renewed focus on taming inflation pushed rate expectations and US bond yields higher.

Elsewhere, the yen strengthened 0.4 per cent to 156.69 per US dollar.

Traders will now turn their attention to Wednesday’s Bureau of Economic Analysis Personal Consumption Expenditures reading, the Fed’s preferred measure of inflation.

August’s personal income and outlays report should show an acceleration in monthly headline and core inflation, according to Bloomberg Economics.

Upside surprises would reinforce the Fed’s hawkish stance and support the case for further tightening, Tim Waterer, chief market analyst at KCM Trade, wrote in a note.

Softer numbers, however, could raise questions about the need for a follow-up rate hike in October and potentially take some of the steam out of the recent rise in Treasury yields, he said.

“Between the oil price, bond yields and key US inflation and jobs data, there is plenty of things to keep an eye on for the rest of the week,” Waterer wrote. BLOOMBERG