Asia’s major markets rallied after two days in the red on Wednesday as traders were buoyed by a Wall Street surge over signs of slowing US inflation and hopes the Federal Reserve’s rate hike programme is coming to an end.
Wall Street’s indices had advanced overnight after the Fed’s preferred wages gauge, the US employment cost index, showed a 1% rise last quarter, its smallest increase in a year.
That early optimism was felt in Japan first where the Nikkei rose before shedding those gains as caution took hold before a crucial US Federal Reserve policy decision later in the day.
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Japan’s factory activity contracting for a third straight month in January, according to a private survey, also weighed on sentiment.
The Nikkei share average edged up 0.07%, or 19.77 points, to close at 27,346.88, after gaining as much as 0.81% earlier in the session, a one-and-a-half-month high. The broader Topix was down 0.15%, or 3.04 points, to 1,972.23.
China stocks rose, while Hong Kong shares rebounded after falling this week as the country’s manufacturing activity showed an improvement, with investors there being hopeful ahead of the Federal Reserve’s rate action.
China’s factory activity shrank more slowly in January after Beijing lifted tough Covid curbs late last year. Meanwhile, Nomura raised China’s 2023 annual GDP growth forecast to 5.3% from 4.8%.
China’s blue-chip CSI 300 Index gained 0.94%, while the Shanghai Composite Index climbed 0.9%, or 29.25 points, to 3,284.92. The Shenzhen Composite Index on China’s second exchange edged up 1.45%, or 31.03 points, to 2,173.59
The Hang Seng Index gained 1.05%, or 229.85 points, to 22,072.18 while the Hang Seng China Enterprises Index rose 1.82%.
The Hang Seng Tech Index also surged 3.4% with electric vehicle giant BYD leading the way as its shares there soared 6.1% after the Chinese firm opened its first dealership in Japan.
Elsewhere across the region, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta were all in positive territory.
But Indian stocks were down with Mumbai’s signature Nifty 50 index losing 0.26%, or 45.85 points, to 17,616.30, weighed down by an $86 billion rout of the Adani Group’s biggest companies in the wake of a scathing short-seller report.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.6% in early trade, after a 1.2% drop on Tuesday.
The Fed will announce its rate decision at 7pm GMT, followed by a news conference with chair Jerome Powell half an hour later.
Interest rate markets have priced in a slowdown in the cracking pace of rate hikes, with a 25 basis point (bps) hike seen bringing the Fed funds rate target range to 4.5-4.75%.
Barring surprises, the focus will be on Powell’s tone. The market is trying to gauge whether he hints at an endpoint for hikes in the near future, as well as whether he pushes back on market pricing for rate cuts beginning as soon as the second half of this year.
The dollar dropped for a fourth straight month in January, and lost 1.5% on the euro and 0.8% on the yen. Both pairs were steady in early Asia trade, with the euro at $1.0860 and the dollar buying 129.91 yen.
US treasuries were cautiously firmer in Asia, with benchmark 10-year yields down 2 bps to 3.5105%. S&P 500 futures fell 0.3%.
Solid earnings also lifted Wall Street and the mood overnight, even as company executives struck a cautious tone as many firms brace for an expected economic slowdown.
In commodity markets, optimism for demand supported oil prices and Brent crude futures were up 0.23% to $85.67 a barrel. Gold, which rallied on the dollar’s weakness through January, paused at $1,927 an ounce.
Tokyo – Nikkei 225 > UP 0.07% at 27,346.88 (close)
Hong Kong – Hang Seng Index > UP 1.05% at 22,072.18 (close)
Shanghai – Composite > UP 0.90% at 3,284.92 (close)
London – FTSE 100 > UP 0.12% at 7,780.66 (0935 GMT)
New York – Dow > UP 1.09% at 34,086.04 (Tuesday close)
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