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Asia Stocks Hit Six-Month Peak on Rate Hikes Slowdown Hopes

Investors are optimistic US inflation will show signs of cooling this week but opinion is split over China’s post-Covid recovery prospects


Asia stock markets
Asian markets hit a six-month high on Wednesday. File photo: AFP

 

Asia stocks rallied on Wednesday hitting a six-month high with investors buoyed by hopes of a rate hikes slowdown in the US and hopes for a post-Covid China recovery.

The upbeat mood filtering across trading floors came ahead of crucial US inflation data due out on Thursday, which it’s hoped may reveal a deceleration in price rises in the world’s No1 economy.

And after spending much of Tuesday fretting about the sustainability of China’s recovery prospects after three years of Covid lockdowns and curbs, investors were again optimistic about the impact of the country’s reopening on the world economy.

 

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Japan’s Nikkei share average rose to a two-week high, with shares in robotics companies leading the charge.

The Nikkei share average edged up 1.03%, or 270.44 points, to close at 26,446.00, while the broader Topix was up 1.08%, or 20.37 points, to 1,901.25.

A rally on Wall Street overnight buoyed the mood in Japanese markets, and the advance was fuelled by the previous day’s earnings announcement from robot maker Yasukawa Electric, which noted improving supply chain conditions. Other high tech names also stood out, with Sony Group up 2.98%.

Hong Kong stocks rose to another six-month high on hopes of a strong economic rebound from the Covid-19 pandemic and some bargain-buying.

But shares in mainland China lost momentum in the afternoon and closed lower, as doubts over the country’s abrupt reopening weighed.

However, Chinese banks extended 1.4 trillion yuan ($206.7 billion) in new yuan loans in December, up from November and beating analysts’ expectations, according to data released by the People’s Bank of China.

China’s blue-chip CSI 300 index dropped 0.19%, while the Shanghai Composite Index fell 0.24%, or 7.67 points, to 3,161.84.

The Hang Seng Index, though, gained 0.49%, or 104.59 points, to 21,436.05 but the Shenzhen Composite Index on China’s second exchange dropped 0.66%, or 13.67 points, to 2,046.76.

China’s markets have had one of their best starts for years in January with Hang Seng Index jumping 8.4% so far this year, while Shanghai Composite Index is up 2.4%, with investors lifted by the country dropping its zero-Covid policy and moving to refocus on economy.

 

Nasdaq tech leads gains

Elsewhere across the region, Australia’s S&P/ASX 200 index rose 0.90% but Indian stocks slipped with Mumbai’s signature Nifty 50 index down 0.10%, or 18.45 points, at 17,895.70.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose as much as 0.82% to touch six-month peak.

Overnight, the tech-heavy Nasdaq led gains for all of the three main US stock indexes, with investors cheered after Federal Reserve Chair Jerome Powell refrained from talking about interest rate policy in his first public appearance of 2023.

But recent comments by other Fed officials have supported the view that the central bank feels it needs to remain aggressive in raising interest rates to control inflation.

Futures indicated the buoyant mood was set to continue in Europe, with the Eurostoxx 50 futures up 0.54%, German DAX futures up 0.57% and FTSE futures up 0.37%.

 

US dollar flat

Investor attention will now be squarely on the US consumer price index (CPI), scheduled to be released on Thursday. The data is expected to show December’s headline annual inflation at 6.5%, versus 7.1% in November.

The US central bank raised interest rates by 50 basis points in December after four straight 75 bps hikes in 2022 but has reiterated that it will keep rates higher for longer to tame inflation.

Investors are betting that the upcoming inflation report could show further deceleration, potentially giving the Fed room to slow the pace of interest rate rises, said Stephen Wu, economist at Commonwealth Bank of Australia.

The dollar index, which measures the dollar against six major currencies, was mostly flat at 103.21, hovering close to a seven-month low.

The Japanese yen weakened 0.05% to 132.33 per dollar, while sterling was last trading at $1.2162, up 0.1% on the day.

US crude fell 1.05% to $74.33 per barrel and Brent was at $79.32, down 0.97% on the day.

 

Key figures

Tokyo – Nikkei 225 > UP 1.03% at 26,446.00 (close)

Hong Kong – Hang Seng Index > UP 0.49% at 21,436.05 (close)

Shanghai – Composite < DOWN 0.24% at 3,161.84 (close)

London – FTSE 100 > UP 0.62% at 7,742.48 (0940 GMT)

New York – Dow > UP 0.56% at 33,704.10 (Tuesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

NOTE: This report was updated with new details following the close of trading in Asian markets.

 

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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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