Asia’s markets were mostly in positive territory on Thursday with investors remaining optimistic about the global recovery but prepared too for the end of an era of cheap cash with inflation continuing to surge.
After a year and a half of ultra-loose monetary policies from the world’s central banks, which helped spur a rebound from the pandemic collapse and send equities flying, concern about consistently high price rises is forcing officials to tighten their belts.
Several have already started – including South Korea and New Zealand, with Singapore joining in on Thursday – but all eyes are on the Federal Reserve, with minutes from its most recent meeting showing it plans to move either next month or December.
A higher-than-expected reading on US consumer inflation pushed the case for a November start to the tapering of its massive bond-buying programme, but the main question on traders’ lips is now when it will begin to hike interest rates.
“Wednesday’s still-elevated consumer price index marks about six months’ worth of hot inflation data – suggesting that inflation is not as transitory as many investors previously expected,” Nancy Davis of Quadratic Capital Management said.
“The overall inflation story is being driven by supply-chain disruptions and a swift rise in prices, due to the labour shortage.”
On Thursday, China said factory-gate inflation had hit its highest level in September in a quarter of a century owing to a spike in commodity costs and rocketing demand as economies reopen.
And with China a crucial exporter to the world, there are concerns the rises will transfer to other economies. Meanwhile, some observers have warned of a period of stagflation in which costs soar but economic growth remains torpid.
Still, investors remained upbeat in Asia after a broadly positive lead from Wall Street.
Singapore Policy Tightening
Tokyo advance more than 1%, while Seoul, Manila and Jakarta added more than a single percentage point too. There were also gains in Sydney, Wellington, Taipei and Mumbai, while Singapore advanced as investors brushed off the surprise policy tightening by the city’s central bank.
The Nikkei 225 rose 1.46%, or 410.65 points, to close at 28,550.93, while the broader Topix index was up 0.67%, or 13.14 points, at 1,986.97.
However, the Shanghai Composite Index dipped 0.10%, or 3.48 points, to 3,558.28, while the Shenzhen Composite Index on China’s second exchange added 0.20%, or 4.87 points, to 2,399.26. Hong Kong was closed for a holiday.
JP Morgan Asset Management’s Virginia Martin Heriz said the outlook for now “still favours equities in the medium term although less so than before.”
Support was also provided by a healthy start to the earnings season, with JP Morgan Chase beating forecasts, while Delta Air Lines saw a profitable third quarter, though it did warn about the impact of fuel prices in the next quarter.
Tokyo > Nikkei 225: UP 1.5% at 28,550.93 (close)
Shanghai > Composite: DOWN 0.1% at 3,558.28 (close)
Hong Kong > Hang Seng Index: Closed for holiday
New York > Dow: FLAT at 34,377.81 (close)
- AFP with additional editing by Sean O’Meara