South Korea stocks gain as Asian equities climb and Fed bets cool

Asian equities gained on Wall Street, mirroring a rise in MSCI’s Asia-Pacific gauge led by South Korea. Fed governor Christopher Waller indicated support for keeping interest rates steady if inflation eases. S&P 500 futures remained unchanged, while Hang Seng futures rose 1.1%, Japan’s Topix was flat, and Australia’s S&P/ASX 200 increased 0.4%.

The S&P 500 Index delivered its strongest session in a month, and the Nasdaq 100 Index climbed 1.2%. The probability of a September interest rate hike fell to roughly even odds from around 70% earlier in the week. The US two-year Treasury yield decreased three basis points to 4.34%. The US dollar fell to its lowest level since May.

Gold continued its upward trend, trading around US$4,475 per ounce. The BOJ's yen strengthened approximately 2% on Thursday, reversing a month-long decline. Traders increased expectations for Bank of Japan rate hikes and remained cautious about potential further interventions to boost the currency. The yen traded around 155.85 per US dollar, up from earlier in the week's low of 155.30.

Waller's remarks reinforced the Fed's data-dependent approach and highlighted recent inflation progress ahead of the final price figures before the September meeting. Analysts now anticipate that the Fed is more likely to hold rates steady than hike, depending on the next inflation data release. Mixed economic data from the US included stable initial jobless claims and a six-month high in the services sector, driven by increased demand and business activity.

Mixed signals existed, with Waller suggesting willingness to hold rates if inflation remained in line with the Fed's 2% target, but also indicating readiness for a rate hike if inflation remained elevated. Bitcoin surpassed US$81,000, while US crude oil rose 0.5% to US$91.85 per barrel, buoyed by Iran's recent attacks on US bases.

Meanwhile, Saudi Arabia's smaller-than-expected increase in crude prices offset some supply concerns. The yen's reversal in sentiment came after weeks of doubts about the long-term effectiveness of Japanese intervention, fueled by speculation that Japan's largest pension fund might raise its allocation target for domestic bonds, marking the currency's best day since a significant intervention just over a month ago.