Asian shares rallied on Friday with traders shrugging off fears of more US rate hikes and instead boosted by promises of more stimulus for China’s economy from Beijing and a likely tax U-turn in the UK.
Equities across the region climbed, tracking their US peers overnight, before slipping for a brief while, as investors sought to secure gains.
Japan’s Nikkei scored its biggest jump in seven months, buoyed by a US turnaround that saw all three major indexes reverse losses after initially falling on Thursday’s release of soaring inflation figures.
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The Nikkei share average jumped 3.25% to 27,090.76, its biggest daily percentage gain since March 17. And the benchmark broke through the key 27,000 barrier for the first time in a week after four straight sessions of losses. The broader Topix index gained 2.35%.
“The Nikkei fell by more than 1,000 in the previous four days of losses, so we can see buying towards a short-term rebound,” said Maki Sawada, a strategist at Nomura Securities, in a call with reporters.
Fast Retailing Co Ltd marked the biggest gain in the Nikkei, up 8.4%, and was by far the largest contributor to the index. The Uniqlo parent company reported record earnings and forecasted higher operating profit for the current fiscal year.
MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 2.2% with Chinese blue chips also rising more than 2%, marking the biggest gain since August.
That came after the country’s central bank governor promised stronger support for the economy as Covid lockdowns spread ahead of the all-important Communist Party Congress starting on Sunday.
The Shanghai Composite Index was up 1.84%, or 55.63 points, to 3,071.99, while the Shenzhen Composite Index on China’s second exchange advanced 2.59%, or 50.06 points, to 1,984.33.
There was also a turnaround in Hong Kong after its markets had spent several days wallowing at 11-year lows. The Hang Seng Index rose 1.21%, or 198.58 points, to 16,587.69.
US Investors Cover Short Bets
Elsewhere across the region, equities rose with stocks in Malaysia, South Korea and Philippines all gaining between 0.8% and 2.3%. Markets in Thailand were closed for a public holiday.
Indian stocks rallied with Mumbai’s signature Nifty 50 index up 1.20%, or 203.45 points, at 17,217.80.
World stocks rose, recovering from the previous session’s two-and-a-half-year lows following in the wake of that overnight rally in US stocks and hopes of more Chinese stimulus.
Much-anticipated US data on Thursday showed core inflation – which excludes food and fuel prices – came in above forecasts at 6.6%, the biggest annual increase in 40 years, driven by large price gains in the services sector.
The data reinforced views that interest rates would stay higher for longer, hastening the risk of a global recession.
US stocks, however, surged to close more than 2% higher, as investors covering short bets drove a dramatic rebound from an earlier selloff.
The MSCI world equity index gained 0.63%, but was heading for little change on the week.
Global markets have been volatile as investors worry rising interest rates could push major economies into recession before they tame inflation.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, dropped 2.5 basis points to 4.424% after hitting a 15-year high of 4.535% overnight.
UK Tax U-Turn Rumours
The dollar index inched 0.1% lower to 112.64, following a drop of 0.6% in the previous session.
The low-yielding Japanese yen was at 147.5 per dollar after touching a 32-year low of 147.67 on Thursday. That is weaker than the 145.9 level which prompted Japanese authorities to intervene last month to prop up the currency.
British government bonds have outperformed in recent days, with prices rising after reports on Thursday that the government was considering a U-turn on some of the measures in its late-September “mini-budget” that triggered a historic gilts slump and concerns about financial stability.
British 10-year gilt yields, which move inversely to price, fell to their lowest since Oct 6 at 4.01%, a drop of 18 basis points on the day.
Investors are also nervously awaiting an impending deadline for the end of the Bank of England’s emergency bond-buying programme, after the central bank stepped in last month to buy bonds to relieve pressure in the two trillion pound UK pensions sector.
Oil prices reversed earlier losses, supported by a weaker US dollar and falling diesel inventories.
Key figures
Tokyo – Nikkei 225 > UP 3.25% at 27,090.76 (close)
Hong Kong – Hang Seng Index > UP 1.21% at 16,587.69 (close)
Shanghai – Composite > UP 1.84% at 1,984.33 (close)
London – FTSE 100 > UP 1.08% at 6,924.15 (0940 BST)
New York – Dow > UP 2.83% at 30,038.72 (close)
- Reuters with additional editing by Sean O’Meara
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Hong Kong Traders Banking on Congress Reboot For IPOs
Japan Consumer Inflation Hit 8-Year High in September: Poll
Yen Plummets to 24-Year Dollar Low as US Inflation Soars
