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Sydney - Asian equities advanced after US stocks hit record highs, while the dollar maintained losses after minutes of last month’s Federal Reserve meeting showed several policy makers were cautious about raising interest rates again this year.
Japanese stocks extended gains, with the Nikkei 225 Stock Average trading at the highest level since 1996. Equities also rose in South Korea, Australia and Hong Kong.
Treasuries were steady after the release of the Fed minutes. Investors still expect borrowing costs to rise this year, with market-implied odds of a US rate hike by year-end remaining at about 77%.
The euro remains on course for a strong week as the immediate threat of Spain’s breakup over Catalonia’s independence bid receded.
Fed officials debated hard last month over whether forces holding inflation down were persistent or temporary, with several policy makers looking for stronger evidence of price gains before supporting a third interest-rate increase this year. For a more detailed look at the discussion, click here.
Fed Atlanta President Raphael Bostic - a voter on rates next year - said he expected inflation to accelerate to 2% over the next year or so, given the strength of the labour market.
While markets remain tilted toward betting on another hike this year, the path for 2018 remains the subject of much debate as the Fed’s balance sheet reduction and any decrease in bond purchases from the European Central Bank reduces new levels of liquidity.
In Japan, where that wash of money has helped propel equities, the Bank of Japan is expected to keep its loose monetary policy.
The selection of Fed Chair Janet Yellen’s replacement is also coming into focus. Trump is meeting this week with Stanford University economist John Taylor, who is on the shortlist of people under consideration to next lead the Fed, three people familiar with the matter said.
Meanwhile, President Donald Trump said his tax plan would simplify the tax code and save money for millions of US businesses and families as he used a speech to truck drivers in Pennsylvania to counter criticism of the proposal.
What’s coming up this week:
Earnings season begins for major US banks, led by JPMorgan Chase, Citigroup, Bank of America and Wells Fargo & Co. The active Atlantic hurricane season will probably figure prominently in US data on retail sales and consumer prices.
Here are the main moves in markets:
Stocks
Japan’s benchmark Topix index added 0.2% as of 2:29pm in Tokyo, touching the highest since July 2007. The Nikkei 225 was up 0.4%, set for the highest level since November 1996.
Australia’s S&P/ASX 200 Index climbed 0.4%, while South Korea’s Kospi index rose 0.6%, while Hong Kong’s Hang Seng Index rose 0.4%. China’s benchmark fluctuated. Futures on the S&P 500 Index were little changed.
The underlying gauge rose 0.2% on Wednesday to a fresh record high. The MSCI Asia Pacific Index increased 0.4%.
Currencies
The Bloomberg Dollar Spot Index edged lower, extending losses into a fifth day. The yen was up 0.2% at 112.30 per dollar.
The euro was at $1.1874, up more than 1% again the greenback this week. The Turkish lira strengthened 0.2% after a 1.7% rise Wednesday.
The US ambassador to Turkey said the two countries are discussing ways to end a visa suspension that sparked a spat, roiling markets.
Bonds
Australia’s 10-year bond yield fell almost 2 basis points, to 2.80%. US’s 10-year yield lost one basis point to 2.34%. Spain’s 10-year yield fell six basis points to 1.64% on Wednesday.
Commodities
West Texas Intermediate crude fell 0.6% to $50.98 a barrel after rising 0.8% on Wednesday. Gold was up 0.3% to $1 295.20 an ounce, extending this week’s advance.
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