Asian markets mostly rose on Friday after a global rally was sparked when US lawmakers voted to avert a catastrophic debt default. Attention now turns to the release of key jobs data later in a day that could determine the Federal Reserve’s plans for tapering monetary policy.
An advance in mainland Chinese stocks also provided some solace as the country reopened after a week-long break, with investors keenly following developments in the crisis at troubled developer Evergrande.
News that Republicans had agreed to lift the US borrowing limit provided some much-needed relief to markets, which had been growing increasingly worried that the government would run out of cash in a few days and fail to meet its debt obligations.
Experts had warned such a scenario would have led to a historic default, plunging the world’s biggest economy into recession and causing a global financial crisis.
While the deal means there will only be enough cash to last until December – leaving open the possibility of another standoff within months – investors are happy to buy up some bargains after a recent run of hefty losses across global equities.
Tokyo, Hong Kong, Sydney, Singapore, Mumbai, Bangkok and Jakarta all rallied. But Seoul, Wellington, Manila and Taipei dipped.
Shanghai also put on a positive showing in the first day of trade since last Thursday, with investors keeping a close eye on moves in the Evergrande saga as it struggles under liabilities worth more than $300 billion.
London extended Thursday’s gains in the morning, though Paris and Frankfurt fell.
Concern now turns to the Fed’s plans to begin withdrawing its huge financial support measures put in place at the start of the pandemic, which have been key to a strong recovery in economies and markets.
The bank has indicated it will begin tapering by the end of the year but has not elaborated how quickly.
The release of non-farm jobs figures later on Friday could be crucial in determining a timetable, with a strong showing ramping up expectations it will kick off next month.
Analysts said the attention will then turn to when officials begin to lift interest rates.
The report comes days after data showed a forecast-beating jump in private jobs creation last month, while surging inflation – made worse by a rally in energy prices – is adding pressure on the Fed to act sooner rather than later.
“As soon as you start thinking about tapering it’s really hard to not then think about what that means for the Fed funds rate and when that might start to increase,” Kim Mundy at Commonwealth Bank of Australia said.
“We do see scope that markets can start to price in a more aggressive Fed funds rate hike cycle.”
Despite the strong advances across global markets, analysts remain wary about the outlook in light of a range of issues that have been dogging investors for months.
“Risk appetite remains fragile with many factors agitating the markets including slowing economic growth, inflation and geopolitical risk catching investors’ attention,” Louise Dudley, of Federated Hermes, said.
“In particular, the supply chain challenges and inflation mean that companies are facing headwinds at both the top and bottom line.”
Oil prices resumed their upward trajectory with both main contracts up more than 1%, having dropped in midweek owing to rising demand expectations and concerns about tight supplies continuing to trouble investors.
Shanghai – Composite: climbed 0.7% to 3,592.17
Tokyo – Nikkei 225 rose 1.3% to 28,048.94
Hong Kong – Hang Seng Index increased 0.6% to 24,837.85
•AFP with additional editing by Mark McCord
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