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Asian shares rise on expectations of a pause in Fed rate hikes and positive developments in China, reaching a two-week high.

By Ankur Banerjee

SINGAPORE (Reuters) –⁣ Asian equities rose on Wednesday and​ the dollar wobbled as weak U.S. labour data‌ bolstered bets that the‍ Federal Reserve was likely done ‍with its interest rate hikes, while beaten-down⁢ China stocks rose for a third straight day.

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Asian Equities Rise ​on Weak U.S. Labor Data

Asian equities rose on⁢ Wednesday ⁤and​ the ‌dollar wobbled as weak U.S. labor data bolstered bets that the Federal Reserve was likely done with its ‌interest rate hikes, while beaten-down China‌ stocks rose for a third straight day.

Positive Momentum in⁤ Asia-Pacific ⁢Shares

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.86% to a two-week top and‌ is on a three-day winning streak. The index⁣ though is ⁤down 6% in August and set ⁣for its⁤ worst monthly performance⁤ since February.

Japan’s Nikkei was⁤ up 0.5%, while the Australia’s S&P/ASX 200⁤ index rose 0.64%.

China shares have gained this ⁣week following the announcement⁢ of measures to lift investor confidence, ‍including halving the stock trading stamp ⁤duty, loosening margin loan rules, and putting the ⁢brakes on new listings.

In early trading, the blue-chip‍ CSI 300 Index was‌ 0.3%‍ higher, while Hong Kong’s Hang​ Seng⁣ Index ⁤rose ‌0.75%.

Analysts though see ⁣a need for more action from Chinese authorities to sustain the rally. “It will take​ more resolute⁣ policy measures and a⁤ sustainable recovery in earnings in order for the rally to last,”​ Carlos Casanova, senior economist for Asia at UBP, said.

Investors’ ⁤focus⁤ will⁣ be on PMI data⁣ from China later this week that will highlight⁤ the state‍ of the economy.

Market Reaction to U.S. Labor Data

Overnight, Wall Street ended sharply higher, while Treasury yields slid ⁣to three-week lows after ⁢data showed U.S. job openings dropped to the⁣ lowest⁤ level ‍in⁤ nearly 2-1/2 years in July, signaling easing labor market pressures. [.N]

“‘Bad news is good news,’⁢ as the data supported bets for a sooner end of the Fed’s hiking cycle despite the recent hawkish rhetoric of Fed Chair ⁤Powell,” Tina Teng, markets analyst ​at ​CMC Markets, said in a note.

With the Fed highlighting that the interest rate path ‌will be heavily⁣ dependent on‌ data, traders are tweaking their ⁤bets ⁤based on the latest indicators.

Markets are pricing ‍in an‌ 89% chance of the Fed​ standing pat at its meeting⁤ next month, the CME FedWatch tool showed, and are now pricing in ⁢a 50% chance of another pause at ⁤the November meeting compared with a 38% chance a ‌day earlier.

A much clearer economic picture will likely be revealed ⁤later in the week when U.S. payrolls and personal consumption expenditure reports are due.

U.S. Treasury yields were stable in Asian ⁣hours. The two-year U.S. Treasury yield, which typically moves in ⁣step with interest⁤ rate ⁢expectations, ‍was up 1.3 basis points at 4.903%, easing away from the three week low of 4.871% it touched on ⁤Tuesday. [US/]

Impact on Currency​ and Commodities

The drop in yields put ​pressure on a buoyant dollar. [FRX/] Against a basket of⁢ currencies, the dollar inched⁤ up 0.029% to 103.58 after ‍slipping⁤ nearly 0.4% on Tuesday.

The yen weakened ​0.15% to ‍146.09 per dollar and remained at levels that led to intervention in ⁣the currency market last year ‌by Japanese authorities.

The⁣ Australian dollar fell 0.32%​ to $0.646 after ​data showed Australian consumer price inflation slowed to a​ 17-month low in July, signaling that interest rates‌ might not have to rise again.

U.S. crude rose 0.32%​ to $81.42 per barrel and ⁣Brent was at $85.69, up 0.23%. Both ​benchmarks rallied more than a dollar a barrel on Tuesday on a soft⁣ dollar. [O/R]

Traders will be closely watching cocoa prices‍ on Wednesday after the London cocoa futures ⁢on ICE rose to ⁣a 46-year high‍ on Tuesday, buoyed by tightening supplies.

Top cryptocurrency bitcoin eased a bit in early Asian hours to trade at $27,554 after rising 7% on ‍Tuesday. A federal ⁣appeals court ruled on Tuesday that the U.S. ​securities regulator was wrong to reject an ​application from Grayscale⁤ Investments to create a spot ⁢bitcoin‍ exchange-traded fund.

(Reporting by Ankur Banerjee; ‌Editing by Edmund ⁣Klamann)

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