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- Asian shares rallied on Wednesday with Japanese stocks leading the way, while investors’ bigger risk appetite pushed up U.S. debt yields and lifted the dollar. Investor appetite for riskier assets drove safe-haven U.S. Treasury yields higher, with the benchmark 10-year note yield US10YT=RR climbing to a 1-1/2-month high of 2.225 percent overnight. Higher U.S. debt yields supported the dollar, which gained 0.2 percent to 121.34 yen JPY=. The euro dipped 0.2 percent to $1.0946 EUR=, extending overnight losses. Comments by European Central Bank President Mario Draghi on Tuesday that policymakers are willing and able to act if needed weighed on the common currency. Markets remained firmly fixed on Friday’s U.S. non-farm payrolls report and whether the data will support the case for the Federal Reserve to hike interest rates in December. Before Friday’s non-farm payrolls, the markets will have a chance to gauge the health of the U.S. economy through the ADP employment data and the ISM report on services sector sentiment due later in the session.
- Activity in China’s services sector expanded at its fastest pace in three months in October, thanks to stronger new business, a private survey showed on Wednesday, easing concerns over persistent weakness in the economy as the manufacturing sector falters. The Caixin/Markit Purchasing Managers’ Index(PMI) rose to 52.0 in October from September’s 14-month low of 50.5, hitting the highest level since July 2015. The private survey focuses on small and mid-sized companies, while the official gauge looks more at larger state firms. Two manufacturing PMIs released earlier showed business conditions in China continuing to cool gradually, moderating fears shared by some global investors of a hard landing for the world’s second-largest economy. Beijing has rolled out a flurry of support steps since last year to avert a sharper slowdown, including slashing interest rates six times since November 2014 and lowering the amount of cash that banks must hold as reserves four times this year. But such measures have been slower to take effect than in the past, and some economists still expect Beijing to roll out more support in coming months. China’s economy grew 6.9 percent between July and September from a year earlier, dipping below 7 percent for the first time since the global financial crisis, though some market watchers believe real growth rates are much weaker than government figures suggest.
- Oil prices slipped in thin trading on Wednesday as investors took profits from the previous session’s rally, while potential supply disruptions in the United States, Brazil and Libya curbed losses. While there were no major supply disruptions, a strike at Brazil’s state-run oil producer Petroleo Brasileiro SA and the closure of the Libyan oil export terminal at Zueitina provided some support to prices, McCarthy said. The Petrobras strike, which has slowed daily oil output by around 25 percent in the world’s ninth biggest oil producer, helped fuel the rally in prices in the previous session. But a likely build in U.S. crude inventories last week weighed on sentiment. Crude stocks rose by an estimated 2.8 million barrels in the week to Oct. 30 to 479.9 million, data from industry group the American Petroleum Institute showed on Tuesday. Official inventory data from the U.S. Department of Energy’s Energy Information Administration will be released later on Wednesday. Investors are also keeping an eye on manufacturing data from China, Japan and the eurozone later on Wednesday.