Markets

Asia Shares Rally on Rate Hike Hopes, Covid Curbs Easing

 

Asian indexes were buoyed by positive noises from the US on future rate hikes on Thursday and some signs Beijing may be ready to cool its strict zero-Covid curbs which have now provoked civil unrest.

Shares across the region rallied after Federal Reserve Chair Jerome Powell opened the door to a slowdown in the pace of monetary tightening. It was a welcome piece of good news for the markets, bruised in recent weeks by China’s Covid woes and the threat of recession.

Japan’s Nikkei index snapped a four-session losing streak after Wall Street rose sharply overnight after Powell struck a more dovish tone than the market had expected.

 

Read more: Asian Markets Rise After Powell Suggests Rate Hikes Set to Slow

 

Wall Street had ended sharply higher on Wednesday after Powell said the central bank might scale back its pace of interest rate hikes as soon as December.

The Nikkei share average rose 0.92% to close at 28,226.08. But the index pared some of its early gains. The broader Topix inched up 0.05% to 1,986.46.

But the US Labor Department’s closely watched non-farm payrolls data is due out on Friday.

“Market participants are still cautious as they await [that] US employment data,” said Takatoshi Itoshima, a strategist at Pictet Asset Management Japan. “There could also be concerns about corporate earnings worsening on the back of a slowing economy.”

Over in China, stocks rose as investors cheered signs of some relaxation in China’s strict anti-Covid curbs.

Expectations have grown around the world that China, while still trying to contain infections, could look to re-open at some point next year once it achieves better vaccination rates among its elderly.

But China’s factory activity shrank in November as widespread curbs disrupted manufacturers’ output, a private sector survey showed on Thursday, weighing on employment and economic growth in the third quarter.

The Hang Seng Index advanced 0.75%, or 139.21 points, to 18,736.44.

The Shanghai Composite Index was up 0.45%, or 14.14 points, to 3,165.47, while the Shenzhen Composite Index on China’s second exchange rallied 1.26%, or 25.41 points, to 2,044.10.

 

MSCI Asia-Pacific Index Hits 30-Year Monthly Peak

Elsewhere across the region, Indian stocks edged ahead with Mumbai’s signature Nifty 50 index up 0.23%, or 42.50 points, at 18,800.85.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 1.65% higher, posting its biggest monthly gain in nearly 30 years in November as hopes for a Fed pivot towards slower rate hikes gathered steam after four consecutive 75-basis-point increases. But the index was still down about 17.8% on the year.

The global picture was equally optimistic with the dollar sliding as investors piled into riskier assets after Fed Chair Powell’s rate hike slowdown hints.

European markets were set to continue the risk-on mood, with the pan-region Eurostoxx 50 futures up 1.29%.

ING regional head of research Robert Carnell said it will be very hard now for the Fed to push back against market expectations for a slowdown in rate hikes.

“It looks as if Fed Chair Powell didn’t get the memo to push back against pivot hopes and keep financial conditions tight before he went to give his speech,” he said. “So let’s hope that inflation does keep on falling, or this may look like a missed opportunity.”

 

Yen Strengthens Against Greenback

The dollar has rallied against every major currency this year, boosted by the Fed’s supersized interest rate hikes to tame scorching hot inflation. 

But hopes of a change in Fed’s policy has spurred bets the peak for rates, and the greenback, may be in the view.

The Japanese yen strengthened 1.19% versus the greenback at 136.43 per dollar, while sterling was last trading at $1.2101, up 0.37% on the day.

In commodity markets, gold prices climbed to a two-week high in early Asian trade on Thursday, adding 0.6% to $1,779.39 an ounce. 

Oil prices dipped on Thursday as uncertainty lingered ahead of Sunday’s OPEC+ meeting, though easing China Covid curbs capped the price decline.

 

Key figures

Tokyo – Nikkei 225 > UP 0.92% at 28,226.08 (close)

Hong Kong – Hang Seng Index > UP 0.75% at 18,736.44 (close)

Shanghai – Composite > UP 0.45% at 3,165.47 (close)

London – FTSE 100 > UP 0.05% at 7,577.09 (0935 GMT)

New York – Dow > UP 2.18% at 34,589.77 (Wednesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Also on AF:

China Softens its Warnings on Severity of Covid-19 After Protests

Chinese Developers’ Offshore Creditors Eye Bargains as Outlook Lifts

 

 

Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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