Asian equities scaled their highest levels in seven months yesterday after some regional markets reopened after holidays, and the Australian dollar hit multi-month highs as surging inflation made higher interest rates more likely.
MSCI’s broadest index of shares listed in the Asia-Pacific region outside Japan rose 0.2 percent to a seven-month high, but traded below the day’s peak.
Singapore’s Straits Times Index jumped 1.6 percent, while South Korea’s KOSPI gained 1.3 percent and Japan’s Nikkei 225 index rose 0.4 percent.
Photo: EPA-EFE
Trading volume was depressed as stock exchanges in Taiwan and China were still closed for the Lunar New Year holiday.
E-mini futures for the S&P 500 shed 0.5 percent, and NASDAQ futures lost 0.8 percent.
Globally, stocks have posted strong gains this year after a torrid last year, based on expectations that inflation is close to peaking and the rise in US interest rates would taper off.
The dismantling of COVID-19 controls in China and the reopening of its borders have further boosted investor sentiment.
“The market continues to price for a dream scenario of inflation having peaked then coming down sharply, but not overshooting to the downside; only the very mildest of recessions by any historical standards,” Rabobank global strategist Michael Every said in a report.
MSCI’s Asia index has rallied 9 percent so far this year after slumping nearly 20 percent last year.
US stock indices closed mixed on Tuesday after companies reported better-than-expected profits, while warning of a difficult year ahead.
Data showed US business activity this month contracted for a troubling seventh straight month.
Shares in Microsoft Inc gave up most of their 4 percent gains posted in after-hours trade.
The tech titan’s better-than-expected results showed some strength in the face of a weak economy, but weak revenue growth signaled tougher times for the sector.
MSCI’s all-country world index eked out a fresh five-month closing high on Tuesday.
Stronger-than-expected economic data in Europe eased market worries of a sharp recession there, but interest rates are still seen creeping higher despite declining energy prices reducing inflationary pressure.
The euro edged toward a nine-month peak of US$1.0927, as euro bulls were encouraged by a rosier growth outlook for the eurozone against signs of a recession looming in the US.
Australian equity markets yesterday fell 0.3 percent after a shock surge in inflation to a 33-year high in the fourth quarter of last year reinforced the case for the Reserve Bank of Australia to keep raising interest rates.
Investors sharply narrowed the odds on the central bank lifting its cash rate by a quarter point to 3.35 percent when it meets on Feb. 7.
Previously, some analysts had thought there was a chance that the central bank might pause its tightening campaign, but the pace of inflation put paid to that.
The New Zealand dollar slid after the country reported annual inflation of 7.2 percent in the fourth quarter, below a central bank forecast of 7.5 percent.
US crude oil prices were stable at US$80.3 a barrel after falling in the previous session as preliminary data indicated a bigger-than-expected rise in US oil inventories.
Gold prices dipped to US$1,927 per ounce, off a nine-month peak in the previous session.
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