Asian shares advance as inflation shock fades to background

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TOKYO (Businesshala) – Asian share prices rose on Friday as a jolt from a surprisingly strong US inflation reading gave investors hope that the worst price hikes may soon be over.

FILE PHOTO: People wearing protective masks, amid the outbreak of the coronavirus disease (COVID-19), are seen on an electronic board displaying Japan stock prices outside a brokerage in Tokyo, Japan, October 5, 2021. Businesshala/Kim Kyung-hoon

Japan’s Nikkei rose 1.1%, helped by sharp gains. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.25%, but mainland Chinese stocks were soft, with the CSI 300 index down 0.3%.

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European stocks are expected to gain 0.15%, with Euro Stokes futures up 0.15% and Britain’s FTSE futures 0.1% higher.

US stock futures in Asia climbed 0.1% after a mixed session on Thursday, when the S&P 500 ended 0.06% higher, while the tech-heavy Nasdaq gained 0.52%.

World stock prices posted their biggest fall in a month on Wednesday after surprisingly strong readings on US inflation.

The US Consumer Price Index rose 6.2% year-on-year in October, the strongest advance since November 1990.

“Inflation is clearly a risk to watch. But a major drop in stock prices will only happen if the Federal Reserve turns out to be completely wrong in its assessment and is forced to raise interest rates sharply. This is not where we are now,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

While inflation data suggested that the current wave of price increases due to old worldwide supply constraints may have more staying power than many expected, many investors still think that inflationary pressures will eventually subside rather than strengthen. Will be done.

“If we get past the holiday shopping season at the end of the year, when demand should have peaked, maybe inflation could subside,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

“US holiday sales are expected to grow 8.5% to 10% this year, with some consumers starting to buy earlier than usual due to concerns about supply disruptions. If that is the case, then we may see a strong retail sales numbers next week, which will be positive for the stocks,” he said.

US retail sales for October are due next Tuesday.

Bond yields rose 0.8 basis points to 1.565% on Friday, with the 10-year US Treasury yield rising after the market holiday on Thursday.

Money markets have already made two rate hikes next year.

In currency markets, the dollar strengthened on Wednesday after a strong US inflation reading raised hopes that the Fed will tighten monetary policy faster than previously thought.

The dollar index against six other currencies touched a 16-month high at 95.264 as the euro slipped to $1.1436, its lowest level since July last year.

The yen softened to its near four-year low of 114.30 per dollar last month, while commodity currencies such as the Australian dollar and the Canadian dollar were on the back foot.

The Australian dollar fell to a five-week low of $0.7277, while the Canadian dollar fell to C$1.2600 per dollar, last seen in early October.

“It is interesting that an increasing number of investors are selling commodity currencies on the expectation that the Fed’s stricture will bring down commodity prices,” said Makoto Noji, chief foreign exchange strategist at SMBC Nikko Securities.

Oil prices fell as markets battled a stronger US dollar along with concerns over rising US inflation, and after OPEC cut its 2021 oil demand forecast due to higher prices.

Brent crude futures were down 0.65% at $82.33 a barrel while US West Texas Intermediate (WTI) futures fell 0.58% to $81.12 a barrel.

Gold prices on Wednesday hit a five-month high as investors sought a hedge against inflation. They were last at $1,859 an ounce, close to Wednesday’s high of $1,868.5.

Reporting by Hideyuki Sano; Editing by Sam Holmes

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