People pass by an electronic screen showing Japan's Nikkei share price index inside a conference hall in Tokyo. Photo: Reuters
Asian shares edged higher on Wednesday as investors clung to hopes that the pace of US and global rate hikes will start to slow, but the optimism was partially offset by new Covid-19 lockdowns in several parts of China.
China stocks also recovered after Beijing’s supportive tone on the market boosted sentiment.
China’s blue-chip CSI 300 Index advanced 0.8%, while Hong Kong stocks rose 1%, attempting another rebound after Monday’s deep sell-off in Chinese assets by global investors worried about Beijing’s policy direction.
Xi Jinping’s new leadership team has raised worries that a more conservative Party leadership will increasingly prioritise the state at the cost of the private sector, and keep tough zero-Covid policies in place well into next year.
Japanese shares rose for the third consecutive day on Wednesday, though gains were limited amid a slide in US futures as domestic investors weighed unexpectedly weak earnings from tech giants Alphabet and Microsoft.
Japan‘s Nikkei share average rose 0.7% and climbed above 27,500 for the first time since September 20. It declined slightly in the afternoon and ended the day at 27,431.84, still its highest close in nearly seven weeks.
MSCI’s broadest index of Asia-Pacific shares outside Japan rallied more than 1%.
In Australia, inflation raced to a 32-year high last quarter as the cost of home building and gas surged. The surprise added pressure on the central bank to reverse a recent dovish turn, though markets doubt there will be a dramatic shift. The Aussie dollar rallied more than 1%.
Markets in India were closed on Wednesday.
European shares, meanwhile, reversed earlier gains and were lower, while US stock futures fell. News that the British government’s plan to repair the country’s public finances will be delayed by more than two weeks to November 17 pushed up bond yields.
Some of Europe’s largest banks warned of growing risks as the economy fizzles after posting stronger-than-expected profits, helped by a trading boom in volatile markets and higher interest rates. Deutsche Bank posted a better-than-expected jump in third-quarter profit, Britain’s Barclays too beat profit forecasts.
Overall, world stocks hit a five-week high on Wednesday. Although the US Federal Reserve is widely expected to deliver another 75 basis point hike in November, a sense that the Fed could then start to slow its aggressive tightening cycle has lifted sentiment in share markets and taken the edge off a dollar rally.
Most Asian currencies also eked out gains thanks to a relatively soft US dollar.
The yuan extended its downward spiral against the greenback early on, but rebounded sharply to close the domestic session at the strongest level in two weeks, as traders and corporate clients raced to liquidate long dollar positions.
Sources said that big state banks had sold dollars in both onshore and offshore markets in late trade on Tuesday to prop up the yuan, making sellers more cautious on Wednesday.
The mood in Asia’s largest economy still remained sour, days after President Xi Jinping’s new leadership team was revealed. Some investors fear coming years could see a greater focus on ideology-driven policy rather than economic growth, and there are no signs the government will soon ease its tough zero-Covid stance.
Meanwhile, Oil prices were broadly stable on Wednesday, moving in and out of negative territory after industry data showed US crude stockpiles rose more than expected last week, though supply concerns and a weaker dollar gave support.
Brent crude futures for December were up 12 cents, or 0.1%, at $93.64 a barrel by 1045 GMT. US West Texas Intermediate (WTI) crude futures for December were up 37 cents, or 0.4%, at $85.69 a barrel.
A weaker US dollar sent a bullish signal, making oil cheaper for holders of other currencies.
Tokyo – Nikkei 225 > UP 0.67% at 27,431.84 (close)
Hong Kong – Hang Seng Index > UP 1% at 15,317.67 (close)
Shanghai – Composite > UP 0.78% at 2,999.50 (close)
London – FTSE 100 < DOWN -0.33 at 6,990.15 (1245 BST)
New York – Dow > UP 1.07% at 31,836.74 (Tuesday close)
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