Hang Seng Closing In On 26K Barrier: Rate Cut Odds Skyrocket

Hong Kong’s stock market is on fire. The Hang Seng Index just posted its third consecutive session in the green, pocketing 710+ points (up 2.8%) along the way. Now sitting just above 25,980, the index is eyeing that 26,000 psychological level.

What’s fueling the rally? Interest rate optimism, full stop. Wall Street showed the way on Wednesday—Dow +314.67 pts (0.67%), NASDAQ +189.10 pts (0.82%), S&P 500 +46.73 pts (0.69%)—all closing near session highs. Traders are basically forgetting about valuation concerns that had been weighing heavy just weeks ago.

Here’s the kicker: Fed rate cut odds just exploded. CME’s FedWatch Tool shows the probability of another 0.25% rate cut next month jumped from 30.1% to 82.9% in just one week. That’s the kind of shift that makes markets move.

On the data front:

• U.S. durable goods orders beat expectations in September
• Unemployment claims dipped unexpectedly last week
• Crude oil gained $0.61/barrel to $58.56 (WTI January), up 1.05%, as geopolitical uncertainty around Russia-Ukraine peace talks surfaced

The play: Asian markets are likely to follow Wall Street’s bullish lead today. Hang Seng breaking past 26,000 looks increasingly probable if this risk-on sentiment holds.