Asian shares were mostly higher on Thursday as investors awaited the release of US consumer price data and kept a cautious eye on the war between Israel and the Palestinian militant group Hamas.
Japan’s Nikkei 225 was up 1.6% at 32,442.08. Sydney’s S&P/ASX 200 was up 0.1% at 7,097.50. South Korea’s Kospi was up 1% at 2,474.32. Hong Kong’s Hang Seng rose 1.9% to 18,228.96, while the Shanghai Composite gained 0.7% to 3,099.21.
“Recent comments from FOMC members have been dovish, suggesting that the Fed may maintain current short-term interest rates,” said Anderson Alves of ActivTrades in a report, referring to the US Federal Reserve’s interest rate policy.
Tensions in the Middle East are in the spotlight, with a possible escalation if countries such as Lebanon or Iran are drawn in, which would trigger significant movement in US Treasuries, he said.
On Wall Street, the S&P 500 rose 0.4% to 4,376.95, its fourth straight session of gains. The Dow Jones Industrial Average added 0.2% to 33,804.87 and the Nasdaq Composite gained 0.7% to 13,659.68. All three indexes fluctuated between small gains and losses throughout the day.
Wall Street has been struggling for the most part since the summer as longer-term bond yields have soared, weighing on prices for all types of investments. There has been some relief this week and yields have eased after Federal Reserve officials hinted that they may be done raising their key overnight interest rate.
The yield on the 10-year Treasury note fell to 4.57% from 4.66% late on Tuesday and from more than 4.80% last week, when it hit its highest level since 2007. As well as hurting the price of investments, high yields have pushed up interest rates on mortgages and other loans, taking some of the steam out of the economy.
The stock market has been boosted by this fall in longer-term yields, but it has also been weighed down by rising shorter-term yields. The two-year Treasury yield, which is more closely linked to Fed expectations, rose to 4.99% from 4.97%.
Yields were mixed after a report showed that wholesale inflation was stronger than economists expected last month. A report on how much US households are paying for inflation is due on Thursday, and economists expect it to show a slowdown.
While the wholesale inflation report was stronger than expected, Rubeela Farooqi, chief US economist at High Frequency Economics, said it wasn’t enough to change her forecast that the Fed’s key interest rate has already peaked.
“Fed officials are beginning to take comfort in the fact that the July rate hike may have been the last in this historic tightening cycle,” said Gregory Daco, chief economist at EY.
Minutes from the Fed’s meeting last month suggested that officials viewed the outlook for the US economy as particularly uncertain. They said they were prepared to “proceed cautiously” in deciding what to do next with interest rates.
Still, with the US government running up large deficits that require more borrowing and buyers in short supply, the pressure on Treasury yields has been mostly upward.
In energy trading, a further fall in crude oil prices is helping to take some of the heat off inflation and support Wall Street. Benchmark US crude was down 58 cents at $82.91 a barrel in electronic trading on the New York Mercantile Exchange. It fell $2.48 to settle at $83.49 on Wednesday. Brent crude, the international standard, fell 50 cents to $85.32 a barrel.
Oil prices have given back much of their strong gains from earlier this week, triggered by the fighting in Gaza. Although the area doesn’t produce much oil, there are concerns that the violence could spill over into the politics surrounding the crude market and disrupt the flow of oil.
Energy stocks in the S&P 500 suffered the biggest losses of the 11 sectors that make up the index.
Exxon Mobil came under additional pressure after it said it would buy Pioneer Natural Resources in an all-stock deal valued at $59.5 billion. Exxon Mobil fell 3.6% and Pioneer Natural Resources rose 1.4%.
In currency trading, the US dollar rose to 149.27 Japanese yen from 149.07 yen. The euro cost $1.0623, little changed from $1.0626.
