Asian markets mixed with focus on US inflation data, Fed meeting

Asian markets were mixed on Friday as optimism about China’s economic reopening continued to offset concerns about rising interest rates and a possible recession.

With little Thursday catalyst to work with, traders were turning their attention to the release of two key US inflation reports – on Friday and Monday – and the Federal Reserve’s final policy meeting of the year.

With data signaling that nearly a year of interest rate hikes were weighing on prices, the US central bank is widely expected to announce a 50 basis point hike at the meeting, compared to the previous four straight 75 point hikes this.

But concerns remain that the world’s top economy remains resilient and the job market is too strong, meaning the Fed may have to keep monetary policy tighter for longer than expected.

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That uncertainty has weighed on US markets, which have endured a tough Christmas so far, and analysts have warned of further pain.

“We think the worst is yet to come,” Gary Schlossberg, at the Wells Fargo Investment Institute, told Bloomberg Television.

“We’re looking for a moderate recession next year, which means a modest decline in corporate profits is our goal for the year.”

The mood was slightly better in Asia, particularly Hong Kong, where investor sentiment has been boosted by China’s decision to move away from its nearly three-year zero-Covid strategy of lockdowns and mass testing that has crippled the economy.

After widespread protests across the country, leaders have decided to loosen their grip, fueling excitement as activity returns to normal.

A promise to help the beleaguered property sector, which makes up a large part of the economy, was also providing a lift.

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“It is likely that the process will be gradual and bumpy in the coming year, due to low immunity in the population and the unpreparedness of the health system to deal with a possible further increase in cases,” said Silvia Dall ‘Angelo, at the Federation of Hermes, in a. Note.

“Reopening should take place in the second half of next year. At that stage, China’s recovery is likely to accelerate, as the lifting of restrictions will allow fiscal and monetary stimulus to be effective.”

And JPMorgan strategist Marko Kolanovic said that he “remains positive on China, due to favorable monetary conditions as well as a full reopening and the end of Covid”.

Hong Kong rose in early trade, along with Tokyo, Sydney, Seoul, Singapore and Taipei, although Shanghai, Wellington, Manila and Jakarta were marginal.

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Oil prices rallied after another big fall, with the two main contracts down more than 10 percent this week as expectations for a recession in the United States and elsewhere weighed on demand prospects.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 1.4 percent at 27,946.21 (pause)

Hong Kong – Hang Seng Index: UP 0.3 percent at 19,498.04

Shanghai – Composite: DOWN 0.2 percent at 3,189.58

Euro/dollar: UP at $1.0570 from $1.0560 on Thursday

Dollar/yen: DOWN at 136.29 yen from 136.61 yen

Pound/dollar: UP at $1.2255 from $1.2239

Euro/pound: DOWN at 86.22 pence from 86.24 pence

West Texas Intermediate: UP 1.0 percent at $72.16 a barrel

Brent North Sea crude: UP 0.9 percent at $76.82 a barrel

dan/cwl

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