San Francisco Frontiers - Asian markets press on with rally, China fund boosts optimism

The mood was enhanced by news that China's massive sovereign wealth fund had bought stakes in the country's biggest banks, fuelling speculation it could broaden its reach to support beleaguered mainland markets.

There has been plenty of optimism on trading floors in recent days after a US jobs report Friday was neither too hot nor too weak, while a string of central bank decision-makers have lined up to suggest they backed a pause in any more monetary tightening.

In the latest remarks, Boston Fed chief Susan Collins said the policy board was being more patient now that rates were at or close to their peak, while Atlanta boss Raphael Bostic said that unless prices surged again, officials did not need to keep hiking.

And Governor Christopher Waller adopted a "watch-and-see" approach.

While the producer price index came in well above estimates Wednesday, analysts said it was seen more as a blip in a generally disinflationary environment.

The main focus is on the release of consumer prices later Thursday.

Wall Street's rise after the PPI contrasts with the risk-off reaction seen in recent months to other above-expectations figures that sparked heavy selling.

Minutes from the Fed's most recent policy meeting showed they would keep rates elevated "for some time" until inflation has been brought to heel.

But while there remains some debate over whether the bank will lift rates again -- they are already at a 22-year high -- or stand still for much of next year, SPI Asset Management's Stephen Innes said one increase was unlikely to have much of an impact.

"Debating whether to fit in one more 25 basis point rate hike in 2023 is little more than a game of trivial pursuits," he said in a note.

"If the Fed's efforts thus far have successfully created a policy stance that's 'sufficiently restrictive' to control inflation, one more 25-basis-point hike won't make a critical difference.

"Conversely, if these efforts haven't controlled inflation by now, it will take more than one additional 25-basis-point increment to do the job."

- Salvaging confidence -

Asian markets continued the week's advances, with Tokyo and Seoul up more than one percent, while Sydney, Singapore, Taipei and Jakarta were also on the front foot.

Hong Kong and Shanghai also rallied on news that China's Central Huijin Investment -- an arm of the $1.4 trillion China Investment Corp -- had bought $65 million of shares in the country's banking giants.

Analysts said the purchase of stakes in Bank of China, Agricultural Bank of China, China Construction Bank and Industrial and Commercial Bank of China was aimed at boosting sentiment in mainland markets, which have been hit by worries over the stuttering economy.

Huijin was also said to be planning to further boost its holdings.

"The national team buying is a much bigger deal to the market and to confidence than the trove of measures including lowering the stamp duty in August," said Li Fuwen, at Guangdong Value Forest Private Securities Investment Management.

"What the market is in desperate (need) of now is a fresh source of funds, and even if it is just a few hundred million a day, this is the way to salvage confidence."

The move comes after a report said earlier this week that the government was looking at a huge sovereign bond issue to pay for infrastructure projects, the latest bid to prop up stalled growth.

Oil prices retreated again, having dived Wednesday on easing worries about supplies linked to a possible widening of the Israel-Hamas conflict.

Both main contracts soared Monday on news of Hamas's shock attack on Israel but they have since fallen back, and Brent is now below its Friday closing price.

Still, traders are keeping a nervous eye on developments.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: UP 1.2 percent at 32,323.28 (break)

Hong Kong - Hang Seng Index: UP 1.7 percent at 18,204.54

Shanghai - Composite: UP 0.5 percent at 3,094.48

Euro/dollar: UP at $1.0625 from $1.0621 on Wednesday

Pound/dollar: UP at $1.2318 from $1.2314

Dollar/yen: DOWN at 149.10 yen from 149.18 yen

Euro/pound: UP at 86.26 pence from 86.23 pence

West Texas Intermediate: DOWN 0.7 percent at $82,90 per barrel

Brent North Sea crude: DOWN 0.6 percent at $85.32 per barrel

New York - Dow: UP 0.2 percent at 33,804.87 points (close)

London - FTSE 100: DOWN 0.1 percent at 7,620.03 (close)

Y.Harris--SFF