Asian shares rebounded on Tuesday though the gains were capped with investors firmly focused on the next round of central bank meetings this week which will surely deliver more interest rate hikes.
That bounceback followed in the wake of a mini-Wall Street recovery with traders reassuring themselves that an expected hefty Federal Reserve rate rise this week has already been priced into the market.
Markets are pricing in a Fed rate hike of at least 75 basis points, with an 18% chance seen of a full percentage point increase.
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Japanese stocks saw some slight gains as its markets resumed trading after a national holiday. The Nikkei share index opened 0.8% higher and rose as much as 1.2% before paring gains to finish up 0.44% at 27,688.42. The broader Topix index added 0.45%.
The Bank of Japan, however, is expected to remain a global outlier by refusing to hike interest rates, even as inflation rises. Japan on Tuesday reported that core consumer inflation touched a near eight-year high in August.
While the latest core consumer inflation figure of 2.8% is lower than many other countries around the world have seen this year, it marks the fifth straight month above the BOJ’s target of 2%, which has partly been driven by the dramatic slide in the yen.
The index’s climb was driven by technology stocks, in line with overnight results from the Nasdaq 100 and the Philadelphia semiconductor index.
Strong tech performers included chipmaking equipment manufacturer Tokyo Electron and tech conglomerate SoftBank Group, both major contributors to the Nikkei.
Beijing Relaxes Visitor Rules
China stocks snapped a four-session losing streak as global markets gained and it kept its benchmark lending rates unchanged at a monthly fixing as expected.
Beijing also issued draft rules aimed at making it easier for some foreigners to enter China for visits to tourism sites along the Chinese border.
The blue-chip CSI 300 Index edged up 0.1%, while the Shanghai Composite Index added 0.2%, or 6.80 points, to 3,122.41. The Shenzhen Composite Index on China’s second exchange was ahead 1.1%, or 21.30 points, to 2,011.66.
Hong Kong leader John Lee said on Tuesday the government aims to make an announcement soon on its controversial Covid-19 hotel quarantine policy for all arrivals, as it wants to keep the city connected with the rest of the world and allow an “orderly opening up”.
Tech giants listed in Hong Kong jumped 2%, with index heavyweights Alibaba surging 3% and Meituan up nearly 2%. The Hang Seng China Enterprises Index advanced 1.1%.
The main Hang Seng Index gained 1.16%, or 215.45 points, to 18,781.42 with casino operators soaring more than 7% on expectations of easing anti-Covid rules.
Elsewhere across the region, equities in Kuala Lampur and Taiwan rose 0.9% each, while shares in Seoul climbed 0.5%.
Indian stocks advanced with Mumbai’s signature Nifty 50 index up 1.4%, or 246.30 points, at 17,868.55.
Dollar Stuck at Two-Decade Highs
Globally, stocks were little changed as investors braced for more hefty interest rate hikes from central banks to quell inflation.
The dollar was steady near a two-decade high versus major peers, crude oil prices were little changed, and euro zone bond yields hit new multi-year highs on concerns over high energy prices.
The MSCI all country stock index was 0.2% ahead, leaving it down about 20% from a lifetime high in January. US stock futures, the S&P 500 e-minis, advanced 0.2%.
Sweden’s central bank hiked rates by a greater than expected full percentage point on Tuesday and warned of more to come. The Fed is also expected to raise rates when a two-day meeting ends on Wednesday, with the Bank of England anticipated to hike on Thursday.
“Tighter monetary policy around the world will increase the headwinds for risk assets – after all, central bankers are deliberately trying to slow aggregate demand,” ING Bank said.
US Crude Picks Up
Markets are priced for rates to climb as high as 4.5% by early 2023, compared with the Fed’s current 2.25%-2.5% policy rate range.
Luca Paolini, chief strategist at Pictet Asset Management, said the US central bank would likely ease the pace of hikes going into next year.
“The market, in a way, is probably expecting a peak in rates,” Paolini said, adding that market focus would then switch to how higher rates were affecting economies and company earnings.
On Monday, the S&P 500 gained 0.7%, the Nasdaq added 0.76% while the Dow Jones Industrial Average rose 0.64%.
The dollar index, which measures the currency against six counterparts, was 0.13% stronger at 109.680.
US crude ticked up 0.3% to $86.01 a barrel. Brent crude rose 0.4% to $92.48 per barrel.
Key figures
Tokyo – Nikkei 225 > UP 0.44% at 27,688.42 (close)
Hong Kong – Hang Seng Index > UP 1.16% at 18,781.42 (close)
Shanghai – Composite > UP 0.22% at 3,122.41 (close)
London – FTSE 100 > UP 0.3% at 7,259.21 (0935 BST)
New York – Dow > UP 0.64% at 31,019.68 (Monday close)
- Reuters with additional editing by Sean O’Meara
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