Asian markets extend US rally after rising inflation, eyes on Fed – Digital Journal

Wall Street, New York. — © Digital Journal.

Asian markets rallied on Wednesday and the dollar struggled to recover as investors welcomed weaker-than-expected US inflation data that could allow the Federal Reserve to ease its rate hike pace.

The reading provided some much-needed holiday cheer on the trading floors and came a day before the US central bank’s final policy decision of the year, which will be closely scrutinized for clues about its 2023 plans.

There is also some focus on China as it continues to roll back its strict zero-covid strategy that has hit the world’s number two economy, although fears of a sharp rise in infections are causing some unease among traders.

Wall Street’s three main indexes ended in positive territory Tuesday in reaction to data showing consumer prices rose 7.1 percent last month, less than expected and the slowest pace since December 2021.

The reading followed a slowdown in October and fueled hopes that inflation has finally peaked after several months of rate hikes by the Fed.

“Last month’s positive surprise came with the caveat that it was ‘only one month of data,’ but the November numbers add more weight to the interpretation that the long-awaited disinflation of goods is showing up in the data,” Taylor said. Nugent of the National Australia Bank. .

Asian markets followed Wall Street higher, though gains were limited ahead of the Fed meeting.

Hong Kong, Tokyo, Shanghai, Sydney, Seoul, Singapore, Taipei, Manila and Jakarta rose.

And the dollar endured losses suffered on Tuesday in reaction to the inflation report, with the yen, euro and pound being the main gainers.

While the Fed is widely expected to raise borrowing costs by 50 basis points on Wednesday after four successive 75-point hikes, its post-meeting statement and comments from chief Jerome Powell are the main focus for traders.

And while the slower inflation print was welcomed, there is still growing concern among investors that the US economy will slip into recession next year, as rates will remain elevated until prices are brought under control. and within the bank’s target of around two percent.

Silvia Dall’Angelo of Federated Hermes said policymakers would slow the rate of hikes so they can “assess the impact on the real economy of the large cumulative tightening that has taken place since March.

“However, the Fed will emphasize that it is still far from fulfilling its mission regarding its fight (against) high inflation, and more hikes will follow in the coming months,” he added.

“Our expectation is that while inflation will ease through 2023, it will remain above target, preventing the Fed from easing next year.”

Oil prices eased slightly after rallying on the weaker dollar, although Brent remained above $80.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.7 percent to 28,141.41 (pause)

Hong Kong – Hang Seng Index: UP 0.3 percent to 19,662.40

Shanghai Composite: UP 0.1 percent to 3,178.01

Euro/Dollar: DOWN to $1.0633 from $1.0635 on Tuesday

Dollar/yen: DOWN to 135.44 yen from 135.59 yen

Pound/Dollar: DOWN to $1.2353 from $1.2366

Euro/pound: UP to 86.08 pence from 85.96 pence

West Texas Intermediate: DOWN 0.5 percent to $75.00 a barrel

Brent North Sea crude: DOWN 0.6 percent at $80.18 a barrel

New York – Dow: UP 0.3 percent to 34,108.64 (close)

London – FTSE 100: UP 0.8% to 7,502.89 (close)