Asia Stocks Rally on US Inflation Boost But Hang Seng Slips

 

Asia’s share indexes rallied on Thursday with investor mood lifted by news that US inflation was cooling and that the Fed might be about to slow down its rate hikes attack on prices.

The region’s outlier was Hong Kong where uncertainties about China’s post-Covid recovery prospects saw traders stay on the sidelines and its main index give up early gains. 

But Japan’s Nikkei share average ended slightly higher, led by its technology heavyweights after the Nasdaq jumped overnight, while a stronger yen weighed on exporters and limited the index’s advance.

 

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The benchmark Nikkei 225 index gained 0.20%, or 55.17 points to end at 27,402.05. The broader Topix index fell 0.36%, or 7.06 points, to 1,965.17.

The S&P 500 and the Nasdaq had closed sharply higher overnight after Federal Reserve Chair Jerome Powell acknowledged that inflation was starting to ease, in remarks he made following a quarter-point rate hike by the US central bank.

Uniqlo brand owner Fast Retailing rose 2.53% and was the biggest boost to the Nikkei, followed by chip-related Tokyo Electron and Advantest, which rose 2.93% and 3.66%, respectively.

Mainland China stocks rose as government steps to reform its initial public offering system bolstered hopes of more fundraising by local companies and marked a big step towards reforming the world’s second-biggest stock market.

The Shanghai Composite Index edged ahead 0.02%, or 0.75 points, to 3,285.67, but the Shenzhen Composite Index on China’s second exchange dropped 0.05%, or 1.10 points, to 2,172.49.

The Hang Seng Index dropped 0.52%, or 113.82 points, to 21,958.36 despite an early boost to its tech stocks which saw Hong Kong-listed Weibo shares surge 7.48% and Baidu jump 4.99%.

 

Powell’s ‘Soft Landing’ Hopes

Elsewhere across the region, Sydney, Seoul, Wellington and Taipei rose but Singapore, Manila and Bangkok fell.

Indian stocks dropped with Mumbai’s signature Nifty 50 index down 0.03%, or 5.90 points, at 17,610.40, where the Adani Group’s decision to abandon its $2.5 billion share sale worsened the Indian conglomerate’s market rout.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.91% higher on Thursday. After shedding nearly 20% last year, the index is up nearly 11% for the year and just had its best January performance since 2012.

Globally, futures indicated European stocks were likely to continue the rally, with Eurostoxx 50 futures up 0.74%, German DAX futures 0.74% higher and FTSE futures up 0.46%.

The US Federal Reserve’s expected 25 basis points interest rate increase, after a year of larger hikes, was being seen as a turning point in the fight against a high inflation rate. But policymakers project “ongoing increases” in borrowing costs will still be needed.

The prospect of a less aggressive pace in monetary tightening has raised expectations, though, of a so-called soft landing – a scenario in which inflation eases against a backdrop of weakening but resilient economic growth.

Powell on Wednesday said that his hopes for an economic soft landing, despite very aggressive interest rate rises, remain alive.

 

US Dollar Falls to 9-Month Low

The focus will now switch to European Central Bank (ECB) and Bank of England (BOE) meetings scheduled for Thursday and the interest rate path the two central banks are likely to take.

Saxo Markets strategists said the ECB has surpassed its peers in hawkishness recently, and will likely repeat that this week. The BOE will likely be the trickiest to predict given indecisive market pricing as well as the scope for a split vote, they said.

In the currency market, the dollar spiked lower following Powell’s remarks, with the US dollar index, which measures the currency against six major peers, falling to a fresh nine-month low of 100.80 on Wednesday. It was last at 100.89 on Thursday.

The euro was up 0.27% to $1.1019. The yen strengthened 0.41% to 128.43 per dollar, while sterling was last trading at $1.2388, up 0.10% on the day.

Spot gold added 0.2% to $1,953.44 an ounce, having touched nine-month high of $1,957 per ounce earlier.

West Texas Intermediate (WTI) US crude rose 1.06% to $77.22 per barrel and Brent was at $83.59, up 0.91% on the day.

 

Key figures

Tokyo – Nikkei 225 > UP 0.20% at 27,402.05 (close)

Hong Kong – Hang Seng Index < DOWN 0.52% at 21,958.36 (close)

Shanghai – Composite > UP 0.02% at 3,285.67 (close)

London – FTSE 100 > UP 0.29% at 7,783.27 (0938 GMT)

New York – Dow > UP 0.02% at 34,092.96 (Wednesday close)

 

• Reuters with additional editing by Sean O’Meara

 

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