Representational image. Reuters
Following a dismal start to the year, Asian markets saw a much-needed rebound on Tuesday. Traders were following a Wall Street recovery driven by bargain-buying and a spike into sold-off tech titans.
The gains occurred as investors attempt to determine the Federal Reserve’s intentions for interest rates this year, with a strong emphasis on the publication of important inflation data this week.
Monday’s sharp decline in oil prices, which is a major cause of inflation, improved the outlook. The Saudi Arabian conglomerate Aramco had earlier this week promised a $2 per barrel price decrease in an attempt to reclaim market dominance.
A rise in stocks at the end of 2023 has collapsed, sending markets reeling into the new year on fears that investors may have been too hopeful that the Fed will cut interest rates as early as March.
The minutes from the bank’s December policy meeting, which revealed decision-makers were content to keep rates at two-decade highs for some time to ensure they fight inflation, sent a shockwave through confidence last week.
Subsequently, an unexpectedly strong employment report was released, demonstrating the robust state of the labour market and confirming the Federal Reserve’s belief that much work has to be done before authorities could declare their goal achieved.
Still, Fed governor Michelle Bowman said rates were at the level needed to bring inflation down to the bank’s two percent target.
“Should inflation continue to fall closer to our two percent goal over time, it will eventually become appropriate to begin the process of lowering our policy rate to prevent policy from becoming overly restrictive,” she said in prepared remarks at the South Carolina Bankers Association in Columbia.
With eyes on the upcoming consumer price index figures, SPI Asset Management’s Stephen Innes said: “If current cooling estimates hold, the month-on-month increase is anticipated to be 0.3 percent, marking the slowest pace of annual core price growth since May 2021.
“This is expected to be perceived positively for risk markets, reinforcing the optimism for market-based rate cuts.”
On Wall Street, all three main indexes powered higher, with the Nasdaq up more than two percent.
And Asia picked up the baton, with Tokyo, Hong Kong and Sydney jumping more than one percent, while Shanghai, Seoul, Singapore, Manila and Wellington were also on the rise.
Oil prices edged up slightly but made little headway into the steep Monday losses that came after Aramco’s move, which fanned concerns that supply was far outstripping demand, particularly with China’s economy still struggling.
The commodity in 2023 suffered its first annual loss since Covid-ravaged 2020 as non-OPEC+ producers filled in for output lost through cuts by Riyadh and other members of the cartel.
Analysts said prices could be even lower if it was not for geopolitical tensions in Ukraine and the Middle East.
Bitcoin was sitting around $46,500, having broken $47,000 on Monday for the first time since April 2022 on bets US regulators will approve exchange-traded funds that invest directly in the cryptocurrency.
Key figures around 0230 GMT
Tokyo – Nikkei 225: UP 1.4 percent at 33,858.63 (break)
Hong Kong – Hang Seng Index: UP 1.1 percent at 16,402.12
Shanghai – Composite: UP 0.3 percent at 2,897.34
West Texas Intermediate: UP 0.3 percent at $71.01 per barrel
Brent North Sea Crude: UP 0.5 percent at $76.46 per barrel
Dollar/yen: DOWN at 143.59 yen from 144.19 yen on Monday
Euro/dollar: DOWN at $1.0961 from $1.0963
Pound/dollar: UP at $1.2760 from $1.2740
Euro/pound: DOWN at 85.93 pence from 85.88 pence
New York – Dow: UP 0.6 percent at 37,683.01 (close)
London – FTSE 100: UP 0.1 percent at 7,694.19 (close)
