Asian stocks rallied on Wednesday after cooler-than-expected inflation figures from the US sparked hopes that prices had peaked and central banks will now rein in their rate rise programmes.
US stocks rose overnight after the unexpectedly small consumer price increase buoyed optimism and that fed into Asian markets with Japan first to react.
Tokyo’s Nikkei closed at a two-week high, tracking Wall Street’s gains, after data showed US inflation barely rose in November.
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The benchmark Nikkei 225 index rose 0.72%, or 201.36 points to end at 28,156.21, its highest close since December 1. The broader Topix index gained 0.60%, or 11.74 points, to 1,977.42.
Technology heavyweights led the Nikkei higher, with chip making equipment maker Tokyo Electron rising 1.9% to provide the biggest boost to the index.
Nervousness about policymakers’ next moves, though, kept the mood in check ahead of a Federal Reserve meeting later in the day and central bank meetings in Britain and Europe on Thursday. Investors are also turning watchful on China’s reopening.
Beijing has finally begun rolling back many of its strict and economically painful Covid curbs, following an unprecedented wave of public unrest.
But cases are now soaring and businesses have been forced to close again as the authorities struggle to contain the surge.
The Shanghai Composite Index advanced 0.01%, or 0.20 points, to 3,176.53, while the Shenzhen Composite Index on China’s second exchange dropped 0.09%, or 1.77 points, to 2,048.61.
The Hang Seng Index was up 0.39%, or 77.25 points, to 19,673.45, as the relaxation of travel curbs boosted some travel stocks.
Bonds Firm, US Dollar Slips
Elsewhere across the region, Indian stocks rose with Mumbai’s signature Nifty 50 index up 0.21%, or 38.15 points, at 18,646.15. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%.
Globally, bonds were firm and the dollar nursed losses after data showed US consumer prices steadied last month.
Overnight Wall Street surged, before paring gains to leave the S&P 500 up 0.7% at the close. The dollar, which is falling from 20-year highs as US interest rate expectations retreat, dropped broadly and sharply, while bonds rallied.
The US consumer price index increased 0.1% last month, 0.2 percentage points slower than economists expected, and in the 12 months through November, headline CPI climbed 7.1% – its slowest pace in about a year.
The S&P 500 was up nearly 2.8% at one stage, while the Nasdaq rose as much as 3.8% before closing 1% higher. S&P 500 futures rose about 0.2% in Asia.
The US dollar fell 1.5% against the yen after the inflation data and was steady at 135.58 yen in Asia. The US dollar index fell to a six-month low of 103.57, before steadying at 104.01. It is down more than 9% from a two-decade high made in September.
Oil Carried Higher
Futures pricing shows markets expect the Fed will slow the pace of hikes but still raise its funds rate target range by 50 bps to between 4.25% and 4.5% later on Thursday.
Much of the focus then falls on the “dot plot” chart of committee members projections about future rate movements, and the tone chairman Jerome Powell strikes in his press conference.
“There are now clear signs that inflation is softening but it is still at elevated level,” said Tareck Horchani, head of dealing, Prime Brokerage, at Maybank Securities in Singapore.
“The market wants to know if the Fed will change their stance on the dot plot,” he said, with the median projection in September being for a peak in the Fed funds rate of around 4.6% next year.
Oil was carried 1% higher with the broader mood, before trimming gains a bit in Asia with Brent futures last at $80.22 a barrel and US crude at $75.02 a barrel.
Bitcoin got a bounce overnight, but was unable to hold onto gains above $18,000. Cryptocurrency markets have been unmoved, but transfixed, by the arrest of FTX founder Sam Bankman-Fried, who was accused by US prosecutors on Tuesday of misappropriating billions of dollars in customer funds.
Key figures
Tokyo – Nikkei 225 > UP 0.72% at 28,156.21 (close)
Hong Kong – Hang Seng Index > UP 0.39% at 19,673.45 (close)
Shanghai – Composite > UP 0.01% at 3,176.53 (close)
London – FTSE 100 < DOWN 0.43% at 7,470.92 (0935 GMT)
New York – Dow > UP 0.30% at 34,108.64 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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