Most Asian shares extend rally, markets await UK inflation data

Asian shares were mostly higher on Wednesday, with U.S. corporate earnings aiding sentiment, while traders awaited British inflation readings later in the day for clues on how hawkish central banks need to be to fight inflation.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2%, but further gains were capped by slight falls in Chinese shares. China’s mainland bluechips lost 0.2% while Hong Kong’s Hang Sang index fell 0.1%.

Elsewhere, stocks tracked Wall Street higher. Japan’s Nikkei advanced 0.4%, Australia’s resources-heavy shares gained 0.4%, while South Korea rebounded 0.5%.

U.S. S&P 500 futures rose 0.8% and the Nasdaq futures jumped 1.3%. Netflix Inc reversed customer losses that had hammered its stock this year and projected more growth ahead, sending shares 14% higher in after-hours trading.

Better-than-expected quarterly results from Goldman Sachs Group Inc, Johnson & Johnson and Lockheed Martin helped U.S. stocks rally. Both the Dow Jones and the S&P 500 gained 1%.

“While shares have managed to find technical support in recent days and could bounce further… the near-term downside risks for shares remain high,” said Shane Oliver, chief economist at AMP Capital.

Chris Turner, global head of markets at ING, said a quiet week for U.S. data could also see the dollar correction extend a little.

“But a core view of not just the Fed, but other central banks hiking into a looming recession should mean that the core dollar bull trend remains intact.”

The U.S. dollar was little changed on Wednesday and hovered close to the weakest level in almost two weeks. It, however, hit another fresh 32-year high of 149.34 yen overnight, before stabilising at 149.16 amid risk of intervention from the Japanese authorities.

Sterling gained 0.14% against the greenback to trade at $1.1335 after easing slightly in the previous session.

The U.K., which has been roiled by a historic crisis in the government bond market, will report inflation readings for September later in the day, with annual inflation likely running at a double digit of 10% last month.

That would likely pressure the Bank of England to hike more aggressively. The BoE said overnight that it would start selling some of its huge stock of British government bonds from Nov. 1, but would not sell this year any longer-duration gilts.

“Amid rapidly fluctuating views/market price on what the Bank of England will decide to do with rates on 2 November, a key data point of reference will be today’s September UK inflation data,” said Ray Attrill, head of FX strategy, at National Australia Bank.

A surprising strong inflation report from New Zealand on Tuesday prompted markets to sharply revise up the expected tightening pace for the Reserve Bank of New Zealand.

Oil prices recovered some ground on Wednesday, after plunging more than 3% in the previous session on fears of higher U.S. supply and the economic slowdown in China.

Brent crude futures rose 0.9% to $90.87 per barrel, while U.S. West Texas Intermediate (WTI) crude jumped 1.5% to $84.03 per barrel.

U.S. President Joe Biden will announce a plan on Wednesday to sell off the last portion of his release from the nation’s emergency oil reserve by year’s end, and detail a strategy to refill the stockpile when prices drop, a senior administration official said.

U.S. Treasury yields were largely steady on Wednesday after edging lower.

The yield on benchmark ten-year notes was little changed at 4.0148% while the yield on two-year notes stabilised at 4.4435%.

Gold was slightly lower. Spot gold was traded at $1651.09 per ounce.