Asia’s major markets ended Monday in positive territory after Hong Kong’s tech firms saw some significant buying-back and Tokyo ruled out a feared capital gains tax hike.
The region’s traders were also picked up by momentum from last week’s US rally after Washington lawmakers averted a painful debt default – but another jump in oil prices added to inflation concerns as the Federal Reserve prepares to taper its ultra-loose monetary policy.
A big miss on US jobs creation last month also did little to change expectations that the Fed will start winding back its massive bond-buying programme as it looks to keep a cap on price rises just as the global recovery shows signs of slowing.
The US Labor Department said just 194,000 new posts were taken up last month, less than half what was forecast, owing to weakness in the service sector, though there was an upward revision to gains in the previous two months.
Tokyo was boosted after new Prime Minister Fumio Kishida said he was not considering hiking capital gains tax any time soon, soothing investor worries that the government was planning the move.
A rise in the dollar to a three-year high against the yen – on expectations for tighter US monetary policy – provided added support.
The benchmark Nikkei 225 index shed earlier losses to end up 1.60%, or 449.26 points, to 28,498.20 yen. The broader Topix index rose 1.77%, or 34.73 points, to 1,996.58.
Hong Kong jumped nearly 2% with tech firms enjoying some much-needed buying after China fined food delivery giant Meituan by a less-than-expected sum for monopolistic practices.
The firm ended up more than 8%, while e-commerce giant Alibaba climbed 7.9%, and gaming firm XD put on more than 9%.
The Hang Seng Index climbed 1.96%, or 487.24 points, to 25,325.09. The Shanghai Composite Index was flat, inching down 0.46 points to 3,591.71, while the Shenzhen Composite Index on China’s second exchange eased 0.43%, or 10.47 points, to 2,403.46.
Singapore, Mumbai and Manila also enjoyed gains, though Bangkok, Sydney and Wellington dipped.
The broad advances were built on Friday’s positive performance that came in the wake of news that Democrats and Republicans had agreed a deal to lift the US debt ceiling to avoid an economically catastrophic default.
Attention will now be on the release of inflation data out of China and the United States this week, with the surge in prices across the world becoming increasingly problematic for governments as economies reopen and demand for goods returns with supplies limited.
The issue has raised speculation that the global economy could be heading for a period of stagflation as inflation surges and growth stays tepid, especially with crude still marching higher to sit at multi-year highs.
Oil Price Pressure
However, Kerry Craig at JP Morgan Asset Management remained positive.
“We do have this environment where we have expectations for inflation rising and expectations for growth falling but I don’t think we are going to be in an environment where we see stagflation becoming entrenched,” he said.
Also in view this week is the start of the corporate earnings season, which will be closely monitored for signs about how companies have fared with rising prices, slowing economic growth, supply chain issues and the spread of the Delta coronavirus variant.
The price of oil continued to surge on growing demand and with the northern hemisphere winter approaching, straining global energy supplies. A decision by OPEC and other major producers not to ramp up output has added to the crisis.
“OPEC’s decision to hold back from a bigger than scheduled increase in output is likely to see the market tighten further in the fourth quarter,” Daniel Hynes, of Australia & New Zealand Banking Group, said.
Tokyo > Nikkei 225: UP 1.6% at 28,498.20 (close)
Hong Kong > Hang Seng Index: UP 2.0% at 25,325.09 (close)
Shanghai > Composite: FLAT at 3,591.71 (close)
New York > Dow: FLAT at 34,746.25 (close)
- AFP with additional editing by Sean O’Meara