Asian Markets Follow Wall Street's Hopes of Inflation Easing

Asian shares followed Wall Street’s lead on Tuesday, with investors suspecting key US economic data due later would show an easing in inflation.

The yen, meanwhile, recouped losses ahead of the nomination of a new central bank governor.

Japan’s currency had weakened on uncertainty surrounding Kazuo Ueda’s probable appointment as the next governor of the Bank of Japan, a surprise choice that could improve the odds of an end to its unpopular yield control policy.

MSCI’s broadest index of Asia-Pacific shares outside Japan rebounded 0.4%, while the Nikkei in Japan rose 0.6%.

Chinese blue chips climbed 0.3%, but Hong Kong’s Hang Seng Index slipped by 0.24%.

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Later Tuesday, the US Bureau of Labor Statistics will release January’s Consumer Price Index (CPI) data, which is expected to show how effective Federal Reserve policy tightening has been in taming inflation.

Analysts expect headline CPI to rise 0.5% in January, with the core number seen advancing to 0.4% from 0.3% the previous month, according to a Reuters poll. On an annual basis, CPI likely eased to 6.2%, from 6.5% in December.

Overnight on Wall Street, the S&P 500 rose 1.2%, while the Nasdaq rallied 1.5% and Dow Jones was up 1.1%.

“Inflation is coming down, but it will not be a smooth decline. A return to target for inflation was never very likely this year, so patience is required regardless,” Seth Carpenter, chief global economist at Morgan Stanley, said.

In the currency markets, the dollar remained subdued ahead of the inflation data, after suffering a 0.3% loss against its major peers last session.

Ueda Set to be BOJ chief

News from Tokyo was that Kazuo Ueda is set to become the next governor of the Bank of Japan, likely to succeed outgoing central bank chief Governor Haruhiko Kuroda on February 24.

The Japanese yen strengthened 0.2% on Tuesday morning after the announcement of the nomination and last stood at 132.13 against the US dollar

Both houses of Japan’s parliament have to approve Ueda’s nomination, but Prime Minister Fumio Kishida’s ruling coalition has a majority in both chambers.

Japan’s 10-year bond yields hovered at 0.5% – hitting the upper limit of the range – as investors bet the yield control policy would wound up eventually under the new governor.

BlackRock Investment Institute on Monday cut Japanese stocks to “underweight”, saying that a Bank of Japan (BOJ) policy change away from its “ultra-loose” monetary strategy could push global yields higher and reduce risk appetite.

Indian shares up but Adani stocks mixed

Meanwhile, the S&P ASX was up 0.2% in Sydney, while the Nifty 50 was up 0.9% and the Sensex up nearly 1% in Mumbai.

Shares of Adani Group companies were mixed on Tuesday, despite the group seeking to reassure investors about its “strong cashflows” and saying its business plans are fully funded.

The group’s market capitalization losses still total about $120 billion since the report accused the Indian conglomerate of “improper” use of opaque tax havens, stock manipulation and having a “precarious” debt level.

India’s market regulator confirmed on Monday that it is investigating the Hindenburg report that has battered Adani stocks.

The group has denied the accusations, but the claims continue to erode the market value of Adani’s seven listed stocks. The turmoil dragged on on Tuesday, with shares of most of the group’s listed companies extending their losses.

Adani Enterprises rose 1.9% after being down for most of the day, but Ambuja Cements dropped 2%, and Adani Gas, Adani Green Energy, Adani Power, Adani Transmission and Adani Wilmar were all down 5%.

Adani Ports and SEZ was the only other group company that enjoyed a rise, of about 1.9%.

In the oil market, Brent crude futures eased 0.7% to $85.99 while US West Texas Intermediate (WTI) crude also fell 1% to $79.2.

Gold was slightly higher. Spot gold traded at $1,855.59 per ounce.