Asian shares rise on China’s Covid shift and weaker dollar
Investors focus on US producer price inflation figures for signs about the health of the economy
09 December 2022 - 07:33
byStella Qiu
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Sydney — Asian shares tracked Wall Street higher amid hopes that China’s economy would pick up pace as Covid-19 curbs ease, though caution ahead of a week full of risk events, including the Federal Reserve’s policy meeting, could cap sentiment.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9% in early trade, edging closer to a three-month high hit earlier in the week. For the week, it was also set to rise 0.9%.
Japan’s Nikkei surged 1.1%.
Hong Kong’s Hang Seng index advanced 1.2%, with mainland developers up a whopping 4%. Chinese blue chips, however, saw more subdued gains.
China Premier Li Keqiang, in comments carried by state media, said on Thursday China’s shift in Covid policy would allow the country’s economy to pick up pace, a day after a top-level party meeting pledged to focus on stabilising growth while optimising the pandemic measures.
Apart from China optimism, investors are focused on US producer price inflation figures later in the day for more signs about the health of the US economy, after data overnight showed some loosening in the labour market, with weekly jobless claims rising moderately.
US stocks snapped their recent losing streak to rebound. The Dow Jones Industrial Average rose 0.55%, the S&P 500 gained 0.75% and the Nasdaq Composite added 1.13%.
US monthly consumer inflation data is also due next week, with economists forecasting inflation likely slowed slightly to 8.0% in November from a year earlier, compared with 8.2% in October.
Futures have priced in a near-certain possibility that the Fed will slow down its rate hike to 50 basis points next week, but the target US federal funds rate would have to peak at about 4.9% by next May.
“This slowing is not a signal that the central bank’s job is nearly done ... the slower pace of hikes starts a new phase of the Fed’s tightening cycle,” said Brian Martin, head of G3 economics at ANZ. “With inflation proving sticky and the labour market still buoyant, the risks to our 5.00% terminal view are to the topside.”
Analysts at Barclays expect the key objective for the Fed at this meeting would be to execute a transition to slower hikes without easing broader financial conditions.
“With data on activity suggesting that the Fed’s hikes, to date, have had limited traction on activity, we think the Federal Open Market Committee will accompany the move with hawkish dots to reiterate that the hiking cycle has a way to go.”
The Fed, the European Central Bank and the Bank of England are all set to announce interest rate decisions next week as policymakers continue to tap the brakes on economic growth through firmer rates to thwart stubbornly high inflation.
The US dollar slid 0.2% against a basket of major currencies on Friday, on top of a drop of 0.4% overnight. The safe-haven greenback was set to finish the week flat.
Treasury yields rose overnight and remained largely steady, after falling to the lowest in three years earlier in the week on expectations of slower growth or that a recession will curb the rise in rates.
The yield on benchmark 10-year Treasury notes held at 3.4819%, compared with its US close of 3.493%. The two-year yield touched 4.3139%, up slightly from its US close of 4.312%.
The yield curve remains the most inverted since the early 1980s at around -83 basis points, pointing towards a US recession in the near future.
In the oil market, prices rose after tumbling the day before amid fears a slowdown in the global economy would lead to reduced demand.
US West Texas Intermediate (WTI) crude futures surged 0.9% to $72.11 per barrel, while Brent crude settled at $76.15 a barrel, 1% higher.
Gold was slightly lower. Spot gold traded at $1,788.99/oz.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Asian shares rise on China’s Covid shift and weaker dollar
Investors focus on US producer price inflation figures for signs about the health of the economy
Sydney — Asian shares tracked Wall Street higher amid hopes that China’s economy would pick up pace as Covid-19 curbs ease, though caution ahead of a week full of risk events, including the Federal Reserve’s policy meeting, could cap sentiment.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9% in early trade, edging closer to a three-month high hit earlier in the week. For the week, it was also set to rise 0.9%.
Japan’s Nikkei surged 1.1%.
Hong Kong’s Hang Seng index advanced 1.2%, with mainland developers up a whopping 4%. Chinese blue chips, however, saw more subdued gains.
China Premier Li Keqiang, in comments carried by state media, said on Thursday China’s shift in Covid policy would allow the country’s economy to pick up pace, a day after a top-level party meeting pledged to focus on stabilising growth while optimising the pandemic measures.
Apart from China optimism, investors are focused on US producer price inflation figures later in the day for more signs about the health of the US economy, after data overnight showed some loosening in the labour market, with weekly jobless claims rising moderately.
US stocks snapped their recent losing streak to rebound. The Dow Jones Industrial Average rose 0.55%, the S&P 500 gained 0.75% and the Nasdaq Composite added 1.13%.
US monthly consumer inflation data is also due next week, with economists forecasting inflation likely slowed slightly to 8.0% in November from a year earlier, compared with 8.2% in October.
Futures have priced in a near-certain possibility that the Fed will slow down its rate hike to 50 basis points next week, but the target US federal funds rate would have to peak at about 4.9% by next May.
“This slowing is not a signal that the central bank’s job is nearly done ... the slower pace of hikes starts a new phase of the Fed’s tightening cycle,” said Brian Martin, head of G3 economics at ANZ. “With inflation proving sticky and the labour market still buoyant, the risks to our 5.00% terminal view are to the topside.”
Analysts at Barclays expect the key objective for the Fed at this meeting would be to execute a transition to slower hikes without easing broader financial conditions.
“With data on activity suggesting that the Fed’s hikes, to date, have had limited traction on activity, we think the Federal Open Market Committee will accompany the move with hawkish dots to reiterate that the hiking cycle has a way to go.”
The Fed, the European Central Bank and the Bank of England are all set to announce interest rate decisions next week as policymakers continue to tap the brakes on economic growth through firmer rates to thwart stubbornly high inflation.
The US dollar slid 0.2% against a basket of major currencies on Friday, on top of a drop of 0.4% overnight. The safe-haven greenback was set to finish the week flat.
Treasury yields rose overnight and remained largely steady, after falling to the lowest in three years earlier in the week on expectations of slower growth or that a recession will curb the rise in rates.
The yield on benchmark 10-year Treasury notes held at 3.4819%, compared with its US close of 3.493%. The two-year yield touched 4.3139%, up slightly from its US close of 4.312%.
The yield curve remains the most inverted since the early 1980s at around -83 basis points, pointing towards a US recession in the near future.
In the oil market, prices rose after tumbling the day before amid fears a slowdown in the global economy would lead to reduced demand.
US West Texas Intermediate (WTI) crude futures surged 0.9% to $72.11 per barrel, while Brent crude settled at $76.15 a barrel, 1% higher.
Gold was slightly lower. Spot gold traded at $1,788.99/oz.
Reuters
Asia shares climb despite global slowdown, rate-hike worries
Asian shares keep rising on hopes of China reopening as oil climbs
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
JSE faces green Asian markets as Tencent surges
Asian stocks ease from three-month highs
China relaxes Covid-19 controls amid rising infection risks
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.