Asian stocks rise on weaker dollar, China stimulus hopes

A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying Nikkei Index charts (top) outside a brokerage in Tokyo, Japan, on March 10, 2022. REUTERS/Kim Kyung-Hoon /File Photo

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  • Chinese blue chips rise 1.2%, Hong Kong gains 2.5%
  • Euro gains on ECB, dollar index down 0.6%
  • ECB raises rates by a record 75 basis points, signals more to come
  • US stocks end higher; Powell vows to fight inflation

SYDNEY, Sept 9 (Reuters) – Asian stocks rose on Friday on a weaker dollar and Beijing’s stimulus hopes, as markets digested hawkish comments from the head of the U.S. Federal Reserve and Central Bank European Union on the trajectory of future rate hikes .

Cautious optimism is set to continue in European markets, with regional Euro Stoxx 50 futures latest up 0.3%, German DAX futures up 0.2% and FTSE FFIc1 futures up 0.4%.

Wall Street’s major indexes posted modest gains after strong selling earlier in the week. S&P 500 futures rose 0.5% and Nasdaq futures rose 0.7%, a sign of better risk appetite as markets stabilized.

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Fed Chairman Jerome Powell said Thursday that the bank is “strongly committed” to controlling inflation, but hopes to do so without the “very high social costs” involved in past inflation fights.

“There’s still a lot of tightening to come, but I guess the Fed is getting closer to the top, so we’ll probably see some slowing in the pace of the increases, if not at this month’s meeting, maybe at the subsequent meetings,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.

“Markets are kind of in that middle zone where interest rates are rising but economic conditions are still okay. That could change if we slip into a recession and equity markets suffer another crash.”

US rate futures have priced an 84% chance that the Fed will hike another 75 basis points at this month’s meeting, which would lift the fed funds rate to a range of 3.0. % to 3.25%. That’s a 77% chance a day earlier.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 1.4% on Friday, led by a 2.5% jump in Hong Kong’s Hang Seng Index (.HSI) and a 1.2% increase in Chinese bluechips (.CSI300). The Asian index was heading for a small drop of 0.2% for the week.

Consumer and producer prices in China rose less than expected in August, data showed on Friday, stoking hopes of renewed stimulus from Beijing as the economy falters. Read more

The Japanese Nikkei (.N225) gained 0.6%.

The ECB raised rates by a record 75 basis points and announced further hikes to fight inflation, even as the bloc’s economy heads into a likely winter recession.

This sent eurozone government bond yields skyrocketing and supported the euro. The yield on German two-year bonds hit its highest level since 2011. The euro gained 0.7% to $1.0069, remaining above parity with the US currency.

The dollar fell 0.6% against a basket of major currencies.

For the week, however, it jumped 2% against the rate-sensitive yen. The Japanese currency fell victim to the Bank of Japan’s accommodative monetary stance, unlike rate hikes elsewhere.

US Treasury yields remained largely flat after climbing in the previous session. The 10-year benchmark bond yield was 3.2982%, down from 3.2920% at the previous close.

Oil prices rose, with U.S. crude rising 0.6% to $84.11 a barrel while Brent crude jumped 0.9% to $89.95 a barrel.

Britain’s new leader, Liz Truss, announced on Thursday a cap on consumer energy bills for two years to cushion the economic blow of war in Ukraine. Read more

Gold was slightly higher. Spot gold was trading at $1721.35 an ounce.

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Editing by Kenneth Maxwell and William Mallard

Our standards: The Thomson Reuters Trust Principles.

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