HONG KONG – Asian markets rose on Wednesday after a positive performance on Wall Street as traders braced for the release of much-awaited US inflation data, while sentiment was also supported by signs of easing tensions. Russian-Ukrainian.
Oil prices also benefited from a slight rebound on demand optimism after two days of losses fueled by positive vibrations from Eastern Europe and as talks on an Iran nuclear deal appear to be progressing.
As speculation swirls around the Federal Reserve’s plans to combat soaring prices, global equities fluctuated wildly at the start of the year as traders try to position themselves for a series of interest rate hikes which should begin in March.
The prospect of the removal of cheap cash – which has pushed markets to record or multi-year highs – has hit tech companies particularly hard as they are more sensitive to higher rates.
However, the sector helped all three major indices in New York post healthy gains on Tuesday, and Asia followed suit in early trade on Wednesday.
Hong Kong jumped more than one percent on the rise of market heavyweights Alibaba and JD.com, while Tokyo, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta were also in sharp rise.
Still, investors remain nervous, and Thursday’s January US inflation is front and center this week.
The forecast is for another rise from the seven per cent, a four-decade high, seen in December, while a big miss in either direction could have dire consequences for markets.
A higher reading will put pressure on the Fed to embark on a more aggressive tightening campaign, but a lower reading would temper concerns.
“Inflation data has continued to rise faster than expected and we are now in a situation where central banks are racing to catch up and tame price pressures,” said Craig Erlam of OANDA.
“Many still expect us to see an orderly return to inflation targets over the forecast horizon with moderate rate increases, but the risk of inaction becomes far greater than the alternative.”
He added: “The next 48 hours will be interesting, with the release of the Fed’s minutes (of its last meeting) and US inflation data. So much has been assessed at this point – five Fed hikes by December – but there is potential for more.
“We may not have peaked yet on rate expectations and Thursday’s (consumer price) reading should be another shocker.”
Signs of possible easing of tensions on the Russian-Ukrainian border also gave some pep to investors.
After speaking with Russia’s Vladimir Putin, French President Emmanuel Macron said he saw the “possibility” that talks between Moscow and Kyiv on the simmering conflict in eastern Ukraine would progress, and ” concrete and practical solutions” to ease tensions.
But hopes of a breakthrough have weighed on the oil market in recent days, as have indications that a deal with Iran over its nuclear program was near.
A deal with Tehran would pave the way for it to start selling crude on the international market again, pushing much-needed supplies into a tight market.
Yet, with demand expected to continue to rise as the global economy reopens, commentators are predicting oil will soon rise above $100 a barrel.
After falling more than 2% on Tuesday, both major contracts were slightly higher at the start of Asian business.
Key figures around 02:50 GMT
Tokyo – Nikkei 225: UP 0.9% to 27,530.82 (pause)
Hong Kong – Hang Seng Index: UP 1.6% to 24,727.06
Shanghai – Composite: UP 0.3% to 3,463.81
Euro/dollar: UP at $1.1430 against $1.1426 on Tuesday evening
Pound/dollar: UP to $1.3560 from $1.3545
Euro/pound: UP at 84.29 pence against 84.27 pence
Dollar/yen: FALL to 115.39 vs. 115.53 yen
West Texas Intermediate: UP 0.2% to $89.51 a barrel
North Sea Brent Crude: UP 0.3% to $91.04 a barrel
New York – Dow Jones: UP 1.1% to 35,462.78 (closing)
London – FTSE 100: 0.1% lower at 7,567.07 (close)
Subscribe to our corporate newsletter
Subscribe to INQUIRER PLUS to access The Philippine Daily Inquirer and over 70 titles, share up to 5 gadgets, listen to the news, download as early as 4am and share articles on social media. Call 896 6000.