Optimism over China rates drives most Asian markets to rise

Monday’s Asian markets rose mainly due to a rally on Wall Street, fueled by optimism about the future of the world economy and the slowing inflation.

After last year’s financial woes due to surging prices, central bank interest rate rises and rising prices, the new year saw a more calm atmosphere on trading floors. Recession fears are receding and bargain-buying is providing support for equities.

China will report its lowest annual growth rate since 1976 this week, but it is not expected to be pandemic-ravaged 2020. However, its recovery from zero-Covid as well as pledges to improve key sectors raise hopes for a strong rebound by 2023.

The signs that the government was easing its grip on the tech sector following a long-running crackdown were encouraging confidence and providing a boost for market leaders such as Tencent and Alibaba.

Frederic Neumann from HSBC said China’s emergence following almost three years’ of strict virus containment measures would likely increase the global economy.

He stated that China was the second-largest economic country in the world. “Accelerating Chinese household and investment spending will help place a floor on global trade at a moment when demand in West is falling.”

Asian markets were able to trade early Monday due to a brighter outlook.

Shanghai, Sydney (Singapore), Taipei and Manila rose.

Tokyo dropped due to a stronger Japanese yen, which weighed on exporters. Hong Kong also retreated from profit-taking after it had rallied by around nine percent since the beginning of the year. Mumbai and Singapore both fell.

In recent weeks, the Japanese unit has seen a surge in value due to a expected slowdown in Federal Reserve rate rises and after Bank of Japan signalled that it was shifting away from years of extremely loose monetary policy.

Expectations that the Fed would raise rates by just 25% at its next meeting have driven the greenback lower against the major peers, such as the pound or euro.

The data last week showing that US inflation was at its lowest level since October 2021 has helped equities rise and decreased bets on a global recession.

This improved sentiment was highlighted in the news that US consumer confidence reached a 12-month high during December. It was helped by a drop of gasoline prices.

There is increasing optimism that the worst-case scenario for a “hard landing” for the economy, caused by rising borrowing costs, won’t happen.

Stephen Innes of SPI Asset Management stated, “Driven by the combination China reopening and falling natural gasoline prices, the market is forced upgrade its pessimistic economic growth outlook for this calendar year.”

“Peak recession worries may end sooner than anticipated, and H2 might see a renewed pick up in economic activity exactly when major central bank hikes stop.”

– The key figures are around 0710 GMT

Tokyo – Nikkei 225: DOWN 1.1 percent at 25,822.32 (close)

Hong Kong – Hang Seng Index: DOWN 0.03 percent at 21,732.22

Shanghai – Composite – UP 1.0% at 3,227.59

Euro/dollar: UP at $1.0837 from $1.0834 on Friday

Dollar/yen: UP at 127.90 yen from 127.87 yen

Pound/dollar: UP at $1.2237 from $1.2235

Euro/pound: UP at 88.86 pence from 88.52 pence

West Texas Intermediate: LOWER 0.8 Percent at $79.26/barrel

Brent North Sea crude: DOWN 0.8 percent at $84.62 a barrel

New York – Dow: UP 0.3 percent at 34,302.61 (close)

London – FTSE 100: UP 0.6 percent at 7,844.07 (close)

This story was contributed by Bloomberg News

dan/aha

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