Asia-Pacific Shares Move Higher as Investors Bet on Fed “Pivot”

The major Asia-Pacific stock indexes are mostly higher on Monday as traders shrugged off China manufacturing and non-manufacturing data that missed expectations, and as investors look ahead to the U.S. Federal Reserve meeting later this week. Traders said the markets were mostly supported by hopes that the Fed might sound less aggressive about future rate hikes later this week.

Gains are being posted in Japan, Hong Kong, South Korea and Australia, but China stocks fell following the weak economic data.

Hong Kong’s Hang Seng Index was up 0.89%, while gaming stocks rebounded following news of an e-visa system for Chinese residents traveling to Macao. In mainland China, the Shanghai Composite was off by 0.03%, CNBC reported.

Factory Activity in China Shrank in October, Missing Expectations

China’s factory activity shrank in October compared with September, data from the National Bureau of Statistics showed.

The official manufacturing Purchasing Managers’ Index print came in at 49.2, missing expectations for a reading of 50 – the mark that separates monthly growth from contraction. In September, the PMI reading stood at 50.1.

China’s official non-manufacturing PMI came in at 48.7, compared with a print of 50.6 in September.

China Residents Will Be Able to Travel to Macao Using E-Visa Starting November 1

China’s immigration bureau said mainland residents will be able to travel to Macao from Nov 1 using an online visa system rather than in-person applications, a move that could increase travel to the world’s largest gambling hub.

But the easing of visa rules comes just as Macao’s government itself has reinstated some tough Covid curbs after a handful of cases were detected there in recent days after no infections for more than three months.

Japan Industrial Production Drops for the First Time in Four Months

Japan’s industrial production fell 1.6% in the month of September from August, government data showed, falling more than expectations of a 1% drop in a Reuters poll and ending a three-month growth streak.

Retail Sales in Australia Rise 0.6% in September

Australia’s retail sales rose 0.6% in September from August, official data showed, in line with expectations in a Reuters poll and at the same pace reported in the previous monthly period.

Short-Term Outlook

Asia-Pacific shares performed well despite mixed-to-bearish economic reports in the region as investors continued to bet on a softer-tone from the U.S. Federal Reserve on Wednesday.

Shares were lifted most of last week on speculation over the timing of a Fed pivot. Following its Nov 1-2 policy meeting, the Fed is expected to raise rates for the fourth-straight time before “pivoting” to a slower pace of rate hikes starting in December.

Although volume is likely to be on the light side ahead of the Fed’s two-day meeting, demand for higher risk shares is likely to remain strong as investors wager that the Fed will curtail its super-sized rate hikes before the end of the year.

After four straight 75-basis point rate hikes, the Fed is expected to drop back to a 50-basis point rise.