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Asia Stocks Lifted by US Rally, Cooling China Inflation

Traders across the region responded positively to US and EU central banks’ determination to beat inflation and a weaker US dollar


China stocks saw their biggest gain in a month, as modest inflation data and policy support hopes helped investors look past tightened Covid measures.
MSCI's broadest index of Asia-Pacific shares outside Japan jumped 1.5% on Friday. AFP file photo.

 

Asian stocks advanced on Friday buoyed by a US rally, cooling Chinese inflation and more clarity on the EU’s and US Fed’s inflation-busting plans.

Japan’s Nikkei ended the week on a high while China’s mainland markets were pulled along by a surging Hong Kong led by its tech giants.

That came after the Federal Reserve chair Jerome Powell said on Thursday the US central bank was “strongly committed” to controlling inflation, while the European Central Bank also signalled further hikes to fight inflation.

 

Also on AF: Germany Seen Reviewing Ways to Reduce Trade With China

 

Japanese stocks gained, building on a rally from the previous day, even as investors digested hawkish remarks from policymakers on aggressive rate hikes to tame inflation.

Japan’s Nikkei share average closed 0.53% higher at 28,214.75. The benchmark index started trading 0.5% up and stayed above the psychological barrier of 28,000 throughout the day.

The Nikkei gained just over 2% in total this week, mostly because of a 2.3% rally on Thursday. The index was flat the first two days of the week and lost 0.7% on Wednesday.

The broader Topix index rose 0.4% to close the week 1.8% higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.5%, driven by a rise in Hong Kong’s Hang Seng index and a 1.4% advance in China’s bluechips. 

China stocks saw their biggest gain in a month, as modest inflation data and policy support hopes helped investors look past tightened Covid-19 measures.

China’s cabinet announced more steps on Thursday to spur investment, state media said, extending a raft of measures to bolster its Covid-ravaged economy.

 

China Producer Inflation Lowest Since February

Meanwhile, China’s consumer prices rose at a slower-than-expected pace in August amid heatwaves and Covid flare-ups, while producer inflation eased to the lowest since February 2021, official data showed.

The Shanghai Composite Index was up 0.8%, or 26.47 points, to 3,262.05, while the Shenzhen Composite Index on China’s second exchange rose 0.65%, or 13.72 points, to 2,118.11.

China-listed real estate developers surged 4.5%, while mainland developers trading in Hong Kong jumped 5.9%.

Tech giants listed in Hong Kong soared 2.8%, with food-delivery firm Meituan up more than 5%, and the Hang Seng Index advanced 2.7%, or 507.63 points, to 19,362.25.

Elsewhere across the region, stocks rallied for a second day, with Singapore up 0.7%, followed by a 0.5% climb in Thailand. Stocks in Malaysia and Philippines advanced too.

Indian stocks gained with Mumbai’s signature Nifty 50 index up 0.3%, or 56.00 points, at 17,854.75.

 

Yen Victim of Dovish BOJ Stance

Globally, world stocks hit one-week high helped by a weaker dollar and the euro rose back above parity to a two-week high against the dollar following the large rate hike and hawkish comments from the European Central Bank.

The dollar stumbled 0.95% against a basket of major currencies and the MSCI world stock index rose 0.63%, heading for a 1.5% weekly gain.

US S&P 500 futures rose 0.5% and Nasdaq futures were up 0.8%, after Wall Street’s main indexes posted modest gains overnight, following heavy selling earlier in the week. 

Analysts said the death on Thursday of Queen Elizabeth, Britain’s longest-reigning monarch, would have little impact on the economy. 

The dollar dropped 1.2% against the yen to 142.32, pulling back from recent 24-year highs.

The Japanese currency has been a victim of the dovish monetary stance from the Bank of Japan, in contrast with rate hikes elsewhere.

“There is still a lot of tightening to come, but I guess the Fed is getting closer to the top, so we will probably see some easing in the pace of hikes, if not in this month’s meeting, maybe in the subsequent meetings,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital. 

Oil prices rose on Friday as investors considered Russia’s threat to halt oil and gas exports to some buyers. US crude advanced 1.2% to $84.53 a barrel while Brent crude surged 1.4% to $90.41 per barrel. 

 

Key figures

Tokyo – Nikkei 225 > UP 0.53% at 28,214.75 (close)

Hong Kong – Hang Seng Index > UP 2.69% at 19,362.25 (close)

Shanghai – Composite > UP 0.82% at 3,262.05 (close)

New York – Dow > UP 0.61% at 31,774.52 (Thursday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

China Inflation Data for August Shows Weak Domestic Demand

Japan Taps $24bn Reserves to Help Fight Rising Living Costs

 

 

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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