Asian stocks edged ahead on Tuesday as investors positioned themselves to react to the latest US inflation data and braced for impending rate hikes in its wake.
Optimistic traders hope US prices may show signs of cooling and persuade the Federal Reserve and other central banks to step back from their aggressive interest rate increases.
But US Treasury Secretary Janet Yellen struck a cautious note on Sunday saying that while she expected a substantial slowdown in 2023 inflation, the US economy remained prone to shocks.
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That was seen as a signal the rate hikes will keep coming and Japan’s Nikkei share average rose to briefly top the key 28,000 level for the second time this month.
The benchmark Nikkei 225 index rose 0.40%, or 112.52 points to end at 27,954.85, after hitting a high of 28,116.56, a level not seen since December 1, but then gradually pared those gains during the morning session and traded mostly sideways in the afternoon.
The broader Topix index gained 0.43%, or 8.35 points, to 1,965.68.
The US consumer price report later in the day will be closely monitored as recent data has suggested that inflation has been sticky, reducing optimism that the Fed may soon pivot following a series of aggressive interest rate increases.
The US central bank is widely expected to raise interest rate by 50 basis points (bps) on Wednesday, down from the 75 bps hikes in its last four meetings.
An overnight weakening of the yen buoyed exporters, as it lifts the outlook for repatriated earnings.
China’s CSI300 Index fell 0.33% as fears of a surge in Covid-19 infections following the dismantling of key parts of government’s zero-Covid policy clouded the outlook for the world’s second biggest economy.
The Shanghai Composite Index dipped 0.09%, or 2.72 points, to 3,176.33, while the Shenzhen Composite Index on China’s second exchange dropped 0.56%, or 11.50 points, to 2,050.37.
But a tourism-linked index jumped more than 2% as Hong Kong eased Covid-19 restrictions for inbound travellers. The Hang Seng Index advanced 0.68%, or 132.57 points, to 19,596.20.
Focus on US Inflation
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.10% in midday trade while Seoul’s KOSPI index was down 0.10%.
Indian stocks advanced with Mumbai’s signature Nifty 50 index up 0.60%, or 110.85 points, at 18,608.00.
Beyond Asia, investors’ main focus was also on the US inflation data due out later in the day, with core CPI inflation expected to slow from 6.3% to 6.1% and headline inflation dropping to 7.3%.
Later this week, the Fed, European Central Bank and the Bank of England are all expected to raise rates by 50 basis points (bps), rather than the aggressive 75 bps hikes they went with earlier in the year.
The dollar index, which measures the greenback’s value against six major currencies, was flat at 105.01.
Oil prices rose further after jumping on Monday due to supply jitters, with Brent crude futures up 1.17% at $78.90 a barrel and US West Texas Intermediate crude up 1.15% at $73.99 a barrel.
Key figures
Tokyo – Nikkei 225 > UP 0.40% at 27,954.85 (close)
Hong Kong – Hang Seng Index > UP 0.68% at 19,596.20 (close)
Shanghai – Composite < DOWN 0.09% at 3,176.33 (close)
London – FTSE 100 > UP 0.28% at 7,467.09 (0935 GMT)
New York – Dow > UP 1.58% at 34,005.04 (Monday close)
- Reuters with additional editing by Sean O’Meara
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