Asia’s markets were buoyed on Friday by strong corporate earnings reports, while traders were also cheered by better-than-expected data showing the US recovery remains on track – despite inflation concerns and the imminent end to cheap cash.
Central banks around the world are preparing to start – or in some cases have already started – winding back the vast financial support put in place at the beginning of the pandemic, which has helped economies rebound and pushed equities to record or multi-year highs.
Soaring prices, supply chain snarls and a brewing energy crisis caused by the reopening from lockdowns have put increasing pressure on finance chiefs to act sooner than they had expected to prevent inflation from getting out of control.
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And that has put a brake on a market rally that had lasted for a year and a half. However, traders regained some optimism this week as strong earnings from banking giants including JP Morgan Chase, Morgan Stanley, Bank of America and Citigroup fuelled hopes for a standout round of reports.
Meanwhile, US figures showing new applications for unemployment benefits fell below 300,000 last week for the first time since the pandemic provided fresh evidence for the recovery narrative.
The S&P 500 on Wall Street had its best day since March, while the Dow and Nasdaq also saw big gains.
Asia followed suit, with Tokyo up and Taipei more than 2% higher. Shanghai, Sydney, Seoul, Singapore and Manila also rose. Hong Kong jumped upwards too, having reopened after two days off, though Jakarta, Bangkok and Wellington dipped.
The benchmark Nikkei 225 index rose 1.81%, or 517.70 points, to 29,068.63. Over the week, it gained 3.6%. The broader Topix index advanced 1.86%, or 36.96 points, to 2,023.93, and added 3.2% from a week before.
The Fed’s Next Move
The Hang Seng Index climbed 1.48%, or 368.37 points, to 25,330.96. The Shanghai Composite Index rose 0.40%, or 14.09 points, to 3,572.37, while the Shenzhen Composite Index on China’s second exchange edged up 0.05%, or 1.26 points, to 2,400.52.
Investors are now awaiting the Federal Reserve’s next move as it plots an exit from its vast bond-buying monetary easing programme, with next month or December seen as the beginning, while bets on an early-2022 interest rate hike are also building.
“We’re likely going to continue to see this elevated inflation and probably well into 2022,” Wealth Enhancement Group’s Nicole Webb said, adding that she saw November as the likely beginning of tapering.
Her comments were echoed elsewhere, with analysts warning that inflation is not going to be a short-term issue, as many observers – as well as Fed officials – had suggested.
Dollar Versus Yen
Expectations for tighter US policy pushed the dollar above 114 yen for the first time since late 2018.
Oil markets continued their march higher, with both main contracts enjoying strong buying on expectations for a pick-up in demand as economies reopen and producers maintain a cap on output.
And bitcoin jumped to within touching distance of $60,000 for the first time since May after a report said the US Securities and Exchange Commission was close to greenlighting the first futures exchange-traded fund for the unit.
The cryptocurrency has been on a rollercoaster ride since hitting a record near $65,000 in April before tanking on concerns about a clampdown in China and mixed messages from major investor and Tesla tycoon Elon Musk.
MARKETS
Tokyo > Nikkei 225: UP 1.8% at 29,068.63 (close)
Hong Kong > Hang Seng Index: UP 1.5% at 25,330.96 (close)
Shanghai > Composite: UP 0.4% at 3,572.37 (close)
New York > Dow: UP 1.6% at 34,912.56 (close)
- AFP with additional editing by Sean O’Meara
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