Tom Westbrook

SINGAPORE (Reuters – Asian stock market rose on Thursday, while the dollar declined and long-dated bonds rallied. Investors feared that inflation would bring forward rates around the globe.

MSCI’s Asia-Pacific share index outside Japan was up 0.4%. The index rose 1%.

While the temperature was marginally lower, it was still quite warm.

Hong Kong markets were closed during the holiday.

In the overnight data, there was a strong increase in U.S. Consumer Prices. Minutes from last month’s Federal Reserve meeting revealed growing concerns about inflation among policymakers and an agreement to begin tapering assets purchases very soon.

The traders responded by moving forward rates-hike expectations, but decreasing the peak. Fed Funds futures moved the initial hike to September 2022, bringing it forward by 25 basis points. However pricing suggests that rates will hover around 1.5% within five years.

This was Gold’s best session for seven months.

Short-term Treasury yields in bonds rose, while longer-term yields dropped. This flattens the curve. The dollar also saw a sharp decline in long-term yields in Asia, as the September rally was halted by the drop in Treasury yields. [FRX/]

Analysts from TD Securities said that the market pulled forward the price of the first rate rise while decreasing the terminal rate prices. This, we believe, is a sign of the market pricing as a mistake.

Wall Street rose 0.3% overnight, while early Asia trade was also up 0.3% ()

On Wednesday, data revealed that U.S. consumer prices rose by 5.4% last year on a year to date. Rent increases also seemed to be rising which raises concerns about persistent price pressure.

Policymakers are no longer described by Fed members as expecting inflation pressures to decrease, a departure from the readouts they received over the summer.

Talking about timing and structuring of bond purchases, policymakers said in minutes that tapering could be initiated in November or December if there is a decision to start it.

Markets are waiting for U.S. jobless claims and producer prices figures on Thursday.

POLICY FOCUS

Unexpectedly, Singapore’s central banks tightened its monetary policy citing higher inflation expectations.

The fastest growth in producer profits since 1996 was seen in China, according to data released Thursday.

Australia’s recent market betting on rate rises starting in 2019 has not been affected by a fall in Australia’s employment figures or comments made by a central bank official concerning laggardly salaries.

Swaps market prices have priced in approximately 90 basis points of rate increases by the end of 2023, despite Reserve Bank of Australia’s assertion that any rises prior to 2024 would be unlikely.

On Thursday, the currency markets were calm after the overnight dollar drop. This was the steepest decline on the euro in five month.

In Asia, the euro stood steady at $1.1591 while sterling and the Australian dollar were unchanged. The New Zealand dollar was also stable.

Three-week peak for the Singapore Dollar

Oil futures were steady on Thursday, comfortably hovering above $80 per bar, at $80.55 per barrel and $83.32. [O/R]

Overnight gains in gold were $1,789 per ounce [GOL/]

The price of the pound remained unchanged at 1.5525%, after dropping three basis points overnight. After rising by 1.8 basis points overnight, it slipped to 0.356% for the second year.

It rose 1.5%, to $58,550. This is its highest point since May.