HONG KONG: Asian markets rallied again on Monday, building on last week’s advances and after a strong showing on Wall Street, speculation that inflation may have peaked dampened expectations for central bank interest rate hikes.
As prices rise at a pace not seen in a generation, finance chiefs have been forced to raise borrowing costs and reverse ultra-loose monetary policies in recent months, sending a chill through the halls of market.
But a string of weak data has led many investors to believe that inflation may have plateaued or is about to plateau, allowing banks to be less hawkish.
The prospect that rates won’t go as high as initially expected helped push Wall Street stocks higher on Friday, with the S&P 500 and Nasdaq ending up more than 3%.
And Asia continued last week’s rally.
Hong Kong leads the winners, climbing more than 2% on strong performance from Chinese tech companies. Indications that the Chinese crackdown on the sector may be coming to an end have added to the optimistic mood in the city.
Tokyo, Shanghai, Seoul, Singapore, Sydney, Manila and Wellington also made good progress.
“The market belief that perhaps the Fed won’t raise rates as aggressively as previously feared and/or that rate cuts before the end of 2023 is now an even more realistic prospect if conditions looming, played a significant role in improving risk sentiment last week,” National Australia Bank’s Ray Attrill said.
Asian markets rise as recession talk dampens rate hike expectations
He added that the rally helped cut around two-thirds of the losses suffered during a painful June 9-16 selloff.
As Fed chiefs continue to announce further significant interest rate hikes, expectations of an extended period of increases have faded, which in turn has calmed the dollar.
Bitcoin has also gained some support, having fallen to $17,600 last week for the first time since December 2020.
“There’s a feeling things aren’t as bad as we thought,” Carol Pepper of Pepper International told Bloomberg Radio.
“There’s a hope that maybe we’ve oversold, maybe there won’t be a recession,” she said.
Key figures around 02:30 GMT
Tokyo – Nikkei 225: 1.0% higher at 26,768.77 (pause)
Hong Kong – Hang Seng Index: UP 2.7% to 22,297.74
Shanghai – Composite: UP 0.8% to 3,377.22
Dollar/yen: DROP to 134.63 yen against 135.17 yen on Friday evening
Pound/dollar: UP to $1.2282 from $1.2280
Euro/dollar: UP at $1.0563 against $1.0559
Euro/pound: UP at 86.01 pence against 85.95 pence
West Texas Intermediate: 0.2% decline to $107.41 a barrel
New York – Dow: UP 2.7% to 31,500.68 (closing)
London – FTSE 100: 2.7% up to 7,208.81 (close)