Asian markets rebound in early trade, building on US gains

September 11, 2022
10:52 pm

AFP NewsNetwork

Asian markets rebound in early trade, building on US gains

Asian markets rebounded in early trade Monday, building on momentum from gains in the United States and Europe late last week as investors priced in expectations of more rate hikes to curb inflation.

Stocks in Japan, Australia, Singapore, Taiwan and Jakarta rose sharply, while markets in Hong Kong, China and South Korea were closed for a public holiday.

The euro continued to strengthen against the dollar as investors in Europe weighed the prospects of the European Central Bank (ECB) following the US Federal Reserve’s lead in raising interest rates.

Bundesbank President Joachim Nagel signaled on Sunday that the ECB is likely to raise interest rates further in order to curb runaway inflation.

Nagel predicted that inflation in Europe could peak at over 10 percent in December.

The ECB raised interest rates by a historic 75 basis points last week and markets expect a similarly large hike at an October meeting.

This week, investors around the world will be keeping a close eye on US inflation data for August, due out on Tuesday, with the consumer price index (CPI) expected to ease slightly to 8% – still well above the Fed’s 2% target.

Traders expect the Fed to issue another big rate hike next week after already two 75 basis point hikes.

“A surprise downside in US CPI is probably of more concern and that could lead to further weakening of the dollar,” Charu Chanana, strategist at Saxo Capital Markets, told Bloomberg Television.

“We saw some glimpses of it… towards the end of last week. That could potentially be a risk to watch especially this week.”

– Hopes for “soft landing” –

On Sunday, US Treasury Secretary Janet Yellen said she was confident the US economy could avoid a recession but that the Fed needed to manage interest rates wisely and also rely on “a bit of luck to achieve what we sometimes do.” call it a soft landing”.

“My hope is that we get a soft landing, but Americans know it’s important to bring inflation down and we can’t have a strong labor market over the long term unless inflation is controlled,” she told CNN.

Yellen said while the US economy’s growth rate slowed, the job market remained “exceptionally strong” with nearly two open positions for every job seeker.

In addition to Tuesday’s US CPI numbers, traders will be closely monitoring Wednesday’s UK CPI and Friday’s European CPI, as well as China home sales, retail sales and industrial production data.

In Tokyo, shares opened higher on Monday, buoyed by upbeat market sentiment following last week’s gains and a weaker yen.

The dollar hit 142.65 yen in early Asian trade, versus 142.56 yen in New York on Friday.

“A cheaper yen is positive for company performance, despite recent media reports” highlighting the negative aspects of the weak yen, said Rakuten Securities chief strategist Masayuki Kubota.

On Friday, Bank of Japan governor Haruhiko Kuroda met Prime Minister Fumio Kishida and said the currency’s rapid weakening was “undesirable,” hinting at possible upcoming measures to stem the fall.