Asian shares scale fresh 7-month high as Hong Kong trade resumes

LONDON: Asian equities rose to a fresh seven-month high on Thursday, with Hong Kong shares playing catch-up to other markets' gains as trade resumed after its three-day Lunar New Holiday.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.56% to 555.81. Hong Kong's Hang Seng index was 1.6% higher. Japan's Nikkei was, however, 0.25% lower.

Trading was thin on Thursday with Australia closed for a holiday and certain parts of Asia, including China, still away for the Lunar New Year. Traders betting that the U.S. Federal will soon tone down its aggressive rate hike policy got a lift after the Bank of Canada on Wednesday became the first major central bank to say it would likely hold off on further increases for now.

After a series of super-sized rate hikes last year, the U.S. central bank is now largely expected to raise rates by a smaller 25 basis points next week on signs that inflation is cooling. "The US GDP release today will be of key interest to gauge whether the market expectations shifting in favour of a soft landing rather than a recession can continue to hold," Saxo strategists said in a note to clients.

The prospect of a less aggressive pace in monetary tightening has stoked expectations of a so-called soft landing - a scenario in which inflation eases against a backdrop of weakening but resilient economic growth. But weak corporate earnings so far have revived worries over the economic impact of the Fed's restrictive policy and the S&P 500 ended lower overnight.

Boeing Co on Wednesday reported a wider loss for 2022 on weakness in its defense unit as it warned of further supply chain issues, with the U.S. planemaker missing Wall Street expectations on revenue and earnings per share in the final quarter of the year. Investor attention will also be on the Bank of England and European Central Bank meetings due next week, with traders looking for clues as to when the central banks are likely to turn dovish.

In the currency market, the dollar index, which measures the U.S. currency against six major rivals, was at 101.57, not far off the eight-month low of 101.51 it touched last week. The Japanese yen strengthened 0.32% to 129.19 per dollar, while sterling was last trading at $1.2407, up 0.06% on the day.

The yield on 10-year Treasury notes was down 1.7 basis points at 3.445%, while the yield on the 30-year Treasury bond was down 2.2 basis points at 3.602%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at -68.8 basis points. The inversion of this curve has predicted eight of the last nine recessions, analysts have said.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 0.6 basis points at 4.131%. Oil prices were up as U.S. crude stocks rose less than expected, with U.S. West Texas Intermediate (WTI) crude rising 0.42% to $80.49 per barrel and Brent at $86.24, up 0.14% on the day.

Gold prices hit a nine-month high on Thursday, with spot gold flat at $1,946.73 per ounce after hitting its highest level since April 2022.