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Asia Stocks Flat as Edgy Investors Wait on US Inflation Data

Traders are banking on a cooling in US prices which will see the US Fed slow down its rate hikes charge


Asia stock markets
A man looks at an electronic board displaying Japan's Nikkei index outside a brokerage in Tokyo, Japan, on August 29, 2022. Photo: Reuters.

 

Asia’s stock indexes took up a holding pattern on Thursday as investors played a wait-and-see game ahead of the release of the latest inflation figure out of the US.

Traders are banking on a cooling of prices in the world’s No1 economy, prompting the US Federal Reserve to ease back on its run of interest rate hikes.

The stand-off saw bourses hold on to their gains from the recent rally sparked by China’s reopening after nearly three years of economically painful Covid curbs.

 

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Japan’s Nikkei share average ended little changed, though banking stocks rallied amid speculation about a Bank of Japan (BOJ) stimulus tweak heading into next week’s policy meeting.

The Nikkei share average edged up 0.01%, or 3.82 points, to close at 26,449.82, while the broader Topix gained 0.36%, or 6.93 points, to 1,908.18.

China stocks edged ahead in thin trading ahead of the Lunar New Year holidays, with investors worried about more Covid outbreaks when markets are closed for the festival.

The week-long holiday that officially starts on January 21 comes after China dropped its zero-Covid strategy last month in a policy U-turn that unleashed a wave of infections across the country.

Meanwhile, China’s annual consumer inflation rate accelerated in December, driven by rising food prices even as domestic demand wavered amid restrained economic activity during the month. 

The Shanghai Composite Index rose 0.05%, or 1.61 points, to 3,163.45, while the Shenzhen Composite Index on China’s second exchange edged up 0.10%, or 2.01 points, to 2,048.77.

Tech giants listed in Hong Kong slumped 1.9%, with Alibaba and Tencent down more than 3% each to drag on the Hang Seng benchmark, which gained 0.36%, or 78.05 points, to 21,514.10.

Indian stocks slid with Mumbai’s signature Nifty 50 index down 0.16%, or 27.80 points, at 17,867.90.

 

Markets Bet on Fed Pace Easing

Due at 1330 GMT, economists expect the rise in core US consumer prices slowed to an annual pace of 5.7% in December, from 6% a month earlier. Month-on-month headline inflation is seen at zero.

The hope is that falling inflation reduces the need for interest rate hikes, and markets have priced better-than-even odds that the Federal Reserve slows its cracking pace and hikes by 25 basis points, rather than 50, at next month’s meeting.

Optimism for a more benign rates outlook and a pickup in demand as China emerges from strict Covid restrictions also drove oil prices sharply higher to one-week peaks.

Brent crude futures topped $83 on Thursday. US Treasuries added a little to overnight gains, with benchmark 10-year yields down 3.7 bps to 3.5189% and 30-year yields down 4.4 bps to 3.6375%.

Along with hopes for gentler central banks in the West, investors are also banking on a recovery in China to help global growth and are eyeing a potential policy shift in Japan.

The Bank of Japan stunned markets last month by widening the band around its 10-year bond yield target, a move that triggered a sudden rise in yields and a jump in the yen.

The yen rose about 0.8% in otherwise quiet currency trade to 131.47 per dollar. The yuan traded near five-month highs at 6.7564 per dollar while the Aussie held above $0.69.

 

Key figures

Tokyo – Nikkei 225 > UP 0.01% at 26,449.82 (close)

Hong Kong – Hang Seng Index > UP 0.36% at 21,514.10 (close)

Shanghai – Composite > UP 0.05% at 3,163.45 (close)

London – FTSE 100 > UP 0.58% at 7,769.98 (0935 GMT)

New York – Dow > UP 0.80% at 33,973.01 (close)

 

  • Reuters with additional editing by Sean O’Meara

 

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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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