Asian markets rise, but caution over rate outlook dampens sentiment – Digital Journal

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Hong Kong led gains in Asia thanks to a rebound in tech companies – Copyright AFP/File GREG BAKER

Asian markets rose on Friday, though caution permeated trading floors as investors tried to gauge the outlook for the Federal Reserve’s monetary policy after several officials tried to temper optimism on signs that inflation is slowing.

While the week has been broadly positive for stocks after weaker-than-expected US consumer and wholesale price numbers, a strong reading on retail sales and jobless claims showed plenty of resistance to the highest interest rates.

With that in mind, St Louis Fed President James Bullard warned that more increases are needed to bring inflation down from four-decade highs, adding that they may need to go as high as 7 percent.

That was followed by Minneapolis Fed chief Neel Kaskari saying he had not seen much evidence that underlying demand was cooling and did not want to forecast when the tightening would end.

The comments followed a similar message issued by other politicians, who have tried to calm markets, which soared after last Thursday’s reading of consumer prices.

They also fueled fears among traders that the strong tightening campaign, which includes four consecutive extraordinary gains of 0.75 points, would drive the world’s largest economy into recession.

On Wednesday, Kansas City Fed chief Esther George said it was unclear how the bank can turn off inflation “without actually having a slowdown” or even a contraction.

All three major Wall Street indexes ended in the red.

Still, Hong Kong led gains across much of Asia thanks to a rebound in tech companies, and after China indicated it would ease some of its tough Covid restrictions and help the struggling real estate sector.

Tokyo, Sydney, Seoul, Wellington, Taipei, Manila and Jakarta also rose, although Shanghai and Singapore fell.

– ‘Fundamental Disconnect’ –

While most of Asia rallied, there were fears that the recent rally was a bit early.

“The market believes that inflation is going down. We also believe that, but the fact that inflation has peaked is not a reason for the Fed to change and cut rates,” Paul Christopher of the Wells Fargo Investment Institute told Bloomberg Radio.

“That’s the fundamental disconnect that still exists between the Fed and the market.”

And Stephen Innes of SPI Asset Management added: “Things can change quickly, mainly when fear of being out drives sentiment.

“However, the odds of a pre-Thanksgiving rally are giving way to the Fed’s aggressive drumbeat and China’s reluctance to reopen play.”

The pound recouped some of its losses suffered on Thursday after Britain unveiled a budget packed with 55 billion pounds ($65 billion) of tax hikes and spending cuts that traders fear will deepen a cost-of-living crisis. and a recession that could last two years. .

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.2 percent to 27,978.06 (pause)

Hong Kong – Hang Seng Index: UP 1.2 percent to 18,266.41

Shanghai Composite: DOWN 0.2 percent to 3,110.06

Pound/Dollar: UP to $1.1892 from $1.1867 on Thursday

Euro/Dollar: LOW to $1.0367 from $1.0370

Dollar/yen: DOWN to 139.91 yen from 140.20 yen

Euro/pound: DOWN to 87.18 from 87.34 pence

West Texas Intermediate: UP 1.1 percent to $82.57 a barrel

Brent North Sea crude: UP 0.9 percent at $90.57 a barrel

New York – Dow: FLAT at 33,546.32 points (close)

London – FTSE 100: DOWN 0.1 percent to 7,346.54 (close)

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