Asian stocks head for weekly gain on US GDP growth
Equities hit nine-month high as data highlights a resilient US economy
27 January 2023 - 07:25
byAnkur Banerjee
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.
The trading gallery of the RHB Investment Bank Bhd. headquarters in Kuala Lumpur, Malaysia on November 21 2022. Picture: Samsul Said/Bloomberg
Singapore - Asian stocks rose on Friday and were poised for their fifth straight week of gains after data highlighted a resilient US economy, boosting investor sentiment ahead of next week’s slate of central bank policy meetings.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose as much as 0.55% to hit an almost nine-month high of 562.10.
The index, which fell nearly 20% last year, is up about 11% so far this month and is on course for its best-ever January performance. Japan’s Nikkei rose 0.07%.
European stock futures indicated that stocks were set to rise, with the Eurostoxx 50 futures up 0.31%, German DAX futures 0.28% ahead and FTSE futures up 0.17%.
The US economy grew faster than expected in the fourth quarter as consumers boosted spending on goods, data showed, but it could be the last quarter of solid GDP growth before the lagged effects of the Federal Reserve’s jumbo interest rate hikes are fully felt.
A separate report showed that labour market remains tight and could lead the Fed to keep interest rates higher for longer.
Ashwin Alankar, head of Global Asset Allocation at Janus Henderson Investors, said the headline GDP suggested robust economic activity and if a recession were to materialise it would be a shallower one. "Overall GDP data was a ‘tale-of-two cities’ – good overall growth stemming from less-than-ideal drivers and prices mitigating but at a rate that is worrisome."
Thursday’s set of data has raised investor hopes of a soft landing - a scenario in which inflation eases against a backdrop of slowing but still resilient economic growth.
Futures are pricing in a 94.7% probability of a 25 basis point hike next Wednesday and see the Fed’s overnight rate at 4.45% by next December, or lower than the 5.1% rate Fed officials have projected into next year.
Data on US personal consumption expenditures (PCE) due at 1.30pm GMT will provide further clues on inflation.
"The disinflation impulse is likely to stretch further, as has been evident from CPI [consumer price index] releases lately, likely continuing to build a case for a 25 basis point rate hike by the Fed next week," Saxo strategists said.
Next week will also feature Bank of England and European Central Bank meetings that will indicate the monetary policy path those central banks are likely to take.
Hong Kong’s Hang Seng index gained 0.13% after surging more than 2% on Thursday. Mainland China markets are due to resume trading on Monday after the lunar new year holiday.
Elsewhere in Japan, core consumer prices in Tokyo, a leading indicator of nationwide trends, rose 4.3% in January from a year earlier, marking the fastest annual gain in nearly 42 years.
The Japanese yen strengthened 0.34% to 129.78/$ as the data reinforced market expectations that quickening inflation could nudge the Bank of Japan to move away from its ultra-easy policy.
"We still think the policy change is a long way off," ING regional head of research Robert Carnell said. "The spring salary negotiations are key to watch as wage growth is a prerequisite for sustainable inflation."
The dollar index, which measures the US currency against six other peers, rose 0.12%, with the euro down 0.11% to $1.0877.
Sterling was last trading at $1.2393, down 0.10% on the day.
Oil prices rose on expectations of a boost to demand from China’s reopening and after the strong US data. US West Texas Intermediate crude rose 0.33% to $81.28 per barrel and Brent was at $87.75, up 0.32% on the day.
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 stocks head for weekly gain on US GDP growth
Equities hit nine-month high as data highlights a resilient US economy
Singapore - Asian stocks rose on Friday and were poised for their fifth straight week of gains after data highlighted a resilient US economy, boosting investor sentiment ahead of next week’s slate of central bank policy meetings.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose as much as 0.55% to hit an almost nine-month high of 562.10.
The index, which fell nearly 20% last year, is up about 11% so far this month and is on course for its best-ever January performance. Japan’s Nikkei rose 0.07%.
European stock futures indicated that stocks were set to rise, with the Eurostoxx 50 futures up 0.31%, German DAX futures 0.28% ahead and FTSE futures up 0.17%.
The US economy grew faster than expected in the fourth quarter as consumers boosted spending on goods, data showed, but it could be the last quarter of solid GDP growth before the lagged effects of the Federal Reserve’s jumbo interest rate hikes are fully felt.
A separate report showed that labour market remains tight and could lead the Fed to keep interest rates higher for longer.
Ashwin Alankar, head of Global Asset Allocation at Janus Henderson Investors, said the headline GDP suggested robust economic activity and if a recession were to materialise it would be a shallower one. "Overall GDP data was a ‘tale-of-two cities’ – good overall growth stemming from less-than-ideal drivers and prices mitigating but at a rate that is worrisome."
Thursday’s set of data has raised investor hopes of a soft landing - a scenario in which inflation eases against a backdrop of slowing but still resilient economic growth.
Futures are pricing in a 94.7% probability of a 25 basis point hike next Wednesday and see the Fed’s overnight rate at 4.45% by next December, or lower than the 5.1% rate Fed officials have projected into next year.
Data on US personal consumption expenditures (PCE) due at 1.30pm GMT will provide further clues on inflation.
"The disinflation impulse is likely to stretch further, as has been evident from CPI [consumer price index] releases lately, likely continuing to build a case for a 25 basis point rate hike by the Fed next week," Saxo strategists said.
Next week will also feature Bank of England and European Central Bank meetings that will indicate the monetary policy path those central banks are likely to take.
Hong Kong’s Hang Seng index gained 0.13% after surging more than 2% on Thursday. Mainland China markets are due to resume trading on Monday after the lunar new year holiday.
Elsewhere in Japan, core consumer prices in Tokyo, a leading indicator of nationwide trends, rose 4.3% in January from a year earlier, marking the fastest annual gain in nearly 42 years.
The Japanese yen strengthened 0.34% to 129.78/$ as the data reinforced market expectations that quickening inflation could nudge the Bank of Japan to move away from its ultra-easy policy.
"We still think the policy change is a long way off," ING regional head of research Robert Carnell said. "The spring salary negotiations are key to watch as wage growth is a prerequisite for sustainable inflation."
The dollar index, which measures the US currency against six other peers, rose 0.12%, with the euro down 0.11% to $1.0877.
Sterling was last trading at $1.2393, down 0.10% on the day.
Oil prices rose on expectations of a boost to demand from China’s reopening and after the strong US data. US West Texas Intermediate crude rose 0.33% to $81.28 per barrel and Brent was at $87.75, up 0.32% on the day.
Reuters
Oil on track for weekly gain as China demand rises
Avoid putting older relatives at risk for Covid-19, China urges citizens
Bangladesh pins its energy hopes on nuclear power
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 opening to flat Asian markets
Karooooo expects Asian business to continue growing fastest
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.