February 25, 2024

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Stocks rise, bonds cool as Fed forecast beats Moody’s credit rating downgrade

Stocks rise, bonds cool as Fed forecast beats Moody’s credit rating downgrade

Passersby are reflected on a board of electricity stock prices outside a brokerage firm in Tokyo, Japan on April 18, 2023. REUTERS/Issei Kato/File Photo Obtaining licensing rights

TOKYO (Reuters) – Stocks rose in Asia on Monday while Treasuries and the dollar remained calm, with investors taking the lead from Wall Street’s rise on Friday, shrugging off Moody’s downgrading of U.S. credit forecasts.

Technology stocks emerged, as they did in the United States at the end of last week, after the calm in long-term Treasury bond yields since the beginning of this month boosted expectations for borrowing-dependent growth stocks.

U.S. 10-year Treasury yields settled at around 4.646%, holding around the top of their range since Nov. 3, when weak labor market data spurred bets on a less hawkish Fed. The return reached 4.935% on November 1.

The US dollar index is hovering below its highest level after the payroll report at 106.01, which it reached on Friday, and there was little change in recent trading around 105.80.

Japan’s Nikkei (.N225) rose 0.46%, with chip-related stocks providing the most support. The Taiwan Heavy Stock Index (.TWII) rose 1.17%.

Hong Kong’s Hang Seng Index (.HSI) rose 0.49% amid outperformance in technology stocks (.HSTECH).

However, mainland Chinese blue chips (.CSI300) fell slightly, and Australia’s resources-heavy index (.AXJO) fell 0.13%.

Naka Matsuzawa, a strategist at Nomura Securities, said stocks were likely nearing a peak.

“So far, the market is taking bad economic news as good news because it means a pause in interest rate hikes by the Fed,” he said.

“But now, the Treasury market has entered a pause, so there is not much room for Treasury yields to fall further,” he added, removing support for the stock market. “In short, I don’t think the stock market rally will continue.”

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The market did not care much about Moody’s announcement late on Friday that it had lowered its outlook on the US credit rating to “negative” from “stable.”

The focus instead remains on upcoming economic data, with US consumer price and retail sales readings scheduled for Tuesday and Wednesday respectively.

Meanwhile, crude oil prices fell on Monday as demand concerns outweighed supply concerns, amid slowing growth in the United States and China.

Brent crude futures for January delivery fell 35 cents, or 0.4%, to $81.08 per barrel, while US West Texas Intermediate crude futures for December delivery reached $76.82, down 35 cents, or 0.5%.

Both benchmarks rose about two percent on Friday as Iraq expressed its support for the oil production cuts implemented by OPEC+.

Kevin Buckland reports

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