Asia’s major share indexes posted modest gains on the week’s opening as traders positioned themselves ahead of another update on the US Fed’s tightening direction
The outliers were China’s mainland markets which slipped on disappointment that Beijing chose an unambitious growth target of 5%, rather than the 5.5%-plus favoured by the market.
But Japan’s Nikkei share average surged to a three-month high, tracking a Wall Street rally’s at the end of last week after US Federal Reserve officials calmed fears of policy overtightening.
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Rate-sensitive tech shares outperformed, after comments from Richard Fed President Thomas Barkin that inflation is “likely past peak” helped to rein in long-term Treasury yields from multi-month highs.
Chipmaking equipment giant Tokyo Electron jumped 3%, Sony added 2.9%. Startup investor SoftBank Group also jumped about 3%, buoyed by news that its subsidiary Arm Ltd aims to raise at least $8 billion from a US listing.
The Nikkei share average was up 1.11%, or 310.31 points, to close at 28,237.78, while the broader Topix gained 0.84%, or 16.97 points, to 2,036.49.
Further gains for Japanese stocks could be hard with Fed Chair Jerome Powell giving testimony to Congress on Tuesday and Wednesday, followed by Bank of Japan Governor Haruhiko Kuroda’s final policy meeting running the following two days. The pivotal US non-farm payrolls report is also due on Friday.
China stocks declined while Hong Kong shares were flat, after Beijing set that modest economic growth target for 2023, undercutting expectations of big stimulus.
China’s blue-chip CSI 300 was down 0.6% by the lunch break, while the Shanghai Composite Index lost 0.19%, or 6.37 points, to end at 3,322.03. The Shenzhen Composite Index on China’s second exchange dropped 0.08%, or 9.03 points, to 11,842.88.
Hong Kong’s Hang Seng Index was little changed, as it edged up 0.17%, or 35.65 points, to 20,603.19.
But the CSI Defence index gained 0.8% after China said it will boost defence spending by 7.2% this year. The CSI Telecom index was up 0.5%, while the Coal index and Energy index dropped 2.2% and 1.3%, respectively.
Similar patterns were also seen in the Hong Kong market, with the Hang Seng Telecom index up 2.1%.
Elsewhere across the region, there were gains in Taipei, Seoul and Sydney. Indian stocks also advanced with Mumbai’s signature Nifty 50 index up 0.71%, or 125.05 points, at 17,719.40.
Fed Chair Powell’s Congress Testimony
Globally, Eurostoxx 50 futures firmed 0.5%, while FTSE futures held steady. S&P 500 futures gained 0.2% and Nasdaq futures 0.4%, after rallying on Friday as bond yields eased back a little.
Yields on 10-year Treasuries stood at 3.94%, after last week’s spike to 4.09% proved tempting enough to attract buyers.
Markets have become resigned to more rate rises from the Federal Reserve but are hoping it will stick with quarter-point moves rather than switch back to half-point hikes.
All of which sets the scene for Fed Chair Jerome Powell’s testimony to Congress on Tuesday and Wednesday, where he will no doubt be quizzed on whether larger hikes are needed.
Much, however, might depend on what the February payrolls report reveals on Friday. Forecasts are centered on a more modest increase of 200,000 following January’s barnstorming 517,000 jump, but risks are on the upside.
BOJ Governor Kuroda’s Final Policy Meeting
Australia’s central bank is expected to lift its rates by 25 basis points on Tuesday, while the Bank of Canada is seen pausing having raised rates at a record pace of 425 basis points in 10 months.
Friday marks the final policy meeting for Bank of Japan Governor Haruhiko Kuroda before Kazuo Ueda takes the reins in April, and all eyes are on the fate of its yield curve control (YCC) stance.
The BOJ jolted markets in December when it unexpectedly widened the allowed trading band for 10-year bond yields to between -50 and +50 basis points.
So far, Ueda has sounded dovish on the outlook for policy which has kept the yen on a softer trend. The dollar was last at 135.61 yen after touching a three-month peak of 137.10 last week.
Oil prices dipped, with investors perhaps disappointed that China did not set itself more ambitious growth targets. Brent eased 62 cents to $85.21 a barrel, while U.S. crude fell 59 cents to $79.09 per barrel.
Key figures
Tokyo – Nikkei 225 > UP 1.11% at 28,237.78 (close)
Hong Kong – Hang Seng Index > UP 0.17% at 20,603.19 (close)
Shanghai – Composite < DOWN 0.19% at 3,322.03 (close)
London – FTSE 100 < DOWN 0.27% at 7,925.69 (0935 GMT)
New York – Dow > UP 1.17% at 33,390.97 (Friday close)
- Reuters with additional editing by Sean O’Meara
Read more:
China Sets 5% Growth Target as National Congress Begins
China to Raise Defence Spending Faster Than Growth Forecast
