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Asian Stocks Rally as Fears Ease Despite Fed Rates Gloom

Investors were in a buying mood across the region, with traders buoyed by the Fed’s hints of a rates hike slowdown


Investors in China have been rattled by fears Beijing will choose ideology over the economy while traders in Japan were buoyed by positive earnings reports
Stocks across the region were choppy on Tuesday. Photo: Reuters.

 

Asian stocks edged ahead on Wednesday despite the gloomy economic picture and uncertainty over the US Fed’s rate hike plans for the months ahead.

There were less-hawkish-than-expected signals from the Fed chairman Jerome Powell on Wednesday, easing some worries about global growth but the corporate outlook remains pessimistic.

Nevertheless, the region’s investors were in a buying mood even as the United States pushes ahead with its steepest interest rate hikes in a generation after it upped rates by a widely expected 75 basis points.

 

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Japan’s Nikkei index erased most of its early gains to close 0.36% up at 27,815.48, after earlier advancing 1.1% to cross the 28,000 mark for the first time since June 10. The broader Topix inched up 0.16% at 1,948.85.

Mitsubishi Motors surged nearly 11% after quarterly profit almost trebled and the automaker lifted its full-year forecast. Energy-related shares were strong, with the utility sector and oil explorers rising 3.7% and 2.4%, respectively.

China stocks rose buoyed by low market rates in the country amid tightening monetary policies worldwide, while Hong Kong shares dropped after the city’s central bank raised its base rate by 75 basis points.

The Hang Seng Index dropped 0.2%, or 47.36 points, to 20,622.68.

Most sectors rose in China but bucking the trend, the CSI300 Real Estate Index lost 1.7% as the country’s property sector continues to struggle.

The Financial Times reported that Beijing was seeking to mobilise up to 1 trillion yuan ($148 billion) of loans for stalled property developments, in its most ambitious attempt to revive the debt-stricken sector.

The Shanghai Composite Index gained 0.2%, or 6.82 points, to 3,282.58, while the Shenzhen Composite Index on China’s second exchange was up 0.4%, or 8.70 points, to 2,203.24.

 

Seoul, Manila Stocks Advance

Elsewhere across the region, equities in Kuala Lumpur, Seoul and Manila gained more than 0.8% each. 

Shares in Mumbai rose to hit their highest level since May 5. The Nifty 50 index was up 1.7%, or 282.40 points, at 16,924.20.

Globally, shares consolidated a six-week high as investors scented a possible slowdown in the pace of US rate hikes that had comforted bond markets and sent the dollar to a three-week low on the yen.

Fed chair Jerome Powell sounded suitably hawkish on curbing inflation in his news conference, but also dropped hints on the size of the next rate rise and noted that “at some point” it would be appropriate to slow down.

The reality was, he added, that if the US central bank does slow its rate hikes it would only be because the economy was struggling, which would not be a good sign.

Just the hint of a less aggressive Fed though had been enough to send MSCI’s 47-country index of world shares up 0.4%, putting it firmly on course for its first back-to-back run of weekly gains since March.

With Europe now facing a gas crisis, and increasingly likely a recession according to economists, the STOXX 600 stalled after rising as much as 0.5%.

Wall Street also looked set to take a post-Fed breather, with S&P 500 futures 0.2% lower and Nasdaq futures down 0.5%, after the tech-heavy index had enjoyed its biggest daily gain since April 2020 on Wednesday.

 

Apple, Amazon Results

Yet shares of several major US tech companies, including Meta Platforms, slid after hours as poor quarterly results and outlooks underscored recession fears.

Traders will be feverishly awaiting results from iPhone maker Apple and Amazon later following torrid runs for their stock prices this year.

Attention will also be on US gross domestic product (GDP) data for the second quarter where another negative reading would meet the technical definition of a recession, though the United States has its own method of deciding those.

Median forecasts are for growth of 0.5%, but the closely watched Atlanta Fed estimate of GDP is for a fall of 1.2%.    

Russia has delivered less gas to Europe this week and warned of further cuts to come, boosting prices for gas and oil globally. A drop in crude inventories and a rebound in gasoline demand in the United States also supported prices.

Brent rose another $1.40 to $108 a barrel, having bounced 2% overnight, while US crude gained $1.50 to $98.73. 

 

Key figures

Tokyo – Nikkei 225 > UP 0.36% at 27,815.48 (close)

Hong Kong – Hang Seng Index < DOWN 0.23% at 20,622.68 (close)

Shanghai – Composite > UP 0.21% at 3,282.58 (close)

New York – Dow > UP 1.37% at 32,197.59 (Wednesday 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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