Asian stocks gain as investors brace for US inflation data

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People walk past an electronic screen showing Japan’s Nikkei stock price index inside a conference room in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

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HONG KONG/TOKYO, July 13 (Reuters) – Stocks edged higher across Asia on Wednesday as the euro sat just above parity against the dollar as investors awaited a much-anticipated report on the US inflation later in the global day.

Futures were down before European markets opened on Wednesday morning. FTSE futures fell 0.24% while pan-regional EuroSTOXX 50 futures fell 0.46%.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) gained 0.66%, posting two consecutive days of losses, after falling to its lowest level in two years the day before.

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Taiwan stocks led the gains after Taiwan’s finance ministry announced late Tuesday that it would activate its equity stabilization fund. The market (.TWII) had fallen to a 19-month low that day. Aviation parts maker Aero Win Technology Corp was the best performer today, up 10%.

The Japanese Nikkei (.N225) rose 0.37% after losing almost 2% the previous day.

But most of the moves looked insignificant ahead of the release of U.S. inflation data for June, which economists polled by Reuters expect to have accelerated to 8.8% on an annual basis, a 40-year high. Read more

A print of high inflation would likely be interpreted by the US Federal Reserve as a sign that it needs to continue with aggressive interest rate hikes to ride out the price spike, even if it could push the economy into recession.

The Fed raised rates by 75 basis points at its last meeting.

“Sharp oil price weakness in July suggests June (inflation) may be peaking, however. If so, the most aggressive phase of Fed tightening could end with a rate hike. by 75 basis points on July 27,” ANZ analysts said.

“However, we expect the underlying strength of underlying inflation and still deeply negative real policy rates to mean that 50 basis point rate hikes will still be appropriate after the summer.”

Underlining global inflation concerns, South Korea’s central bank on Wednesday raised rates by 50 basis points, the biggest increase since the bank adopted its current policy system in 1999, and the central bank of New Zealand also increased its rates by the same amount. Read more

Concerns that higher rates could slow global economic growth have been a major factor in stock market declines this year, while in currency markets the main effect has been to boost the safe-haven dollar.

The euro was at $1.00350 on Wednesday as investors remained focused on whether it would fall below a U.S. dollar for the first time since 2002.

It fell a hair’s breadth on Tuesday, falling to $1.00005.

The dollar was also firm against other peers, and its index against its major rivals held solidly at 108.27.

The US benchmark 10-year yield was 2.9724%, after trading up and down 3% last week.

Oil prices halted their declines overnight. Brent crude was little changed at $99.60 a barrel with US West Texas Intermediate crude at $95.89.

Major cryptocurrency Bitcoin rose 0.23% and looked on track to snap a three-day losing streak, although at $19,478.89 was still trading below the key psychological 20 mark. $000.

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Reporting by Alun John and Sam Byford; Editing by Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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