Following Wall Street’s strong overnight lead, most Asian stock markets saw a small increase. Investors were awaiting crucial American inflation data. Hence, gains weren’t strong.
As China reversed more movement restrictions and quarantine measures, uncertainty over the country’s rising COVID-19 cases also affected regional sentiment.
In anticipation that the Fed and other significant central banks will soften their hawkish positions to help avert a potential recession. Wall Street indexes closed higher overnight. This sentiment spread to Asia. The Nikkei 225 index in Japan and the Hang Seng index in Hong Kong rose 0.4% and 0.6%, respectively.
This week’s trade data from Japan will be scrutinized to see if the yen’s recent recovery and improving commodity prices have helped ease the country’s massive import bill.
Fed Will Raise Interest Rates
On Monday, data revealed that consumer inflation continued to decline in November. This indicated that the Reserve Bank would raise interest rates more gradually. Furthermore, India’s Nifty 50 and BSE Sensex 30 indexes increased by 0.211%.
However, the monthly industrial production data offset the market sentiment. While November’s reading was expected to come in lower than the previous month, markets were cautious about potential growth, especially given Friday’s stronger-than-expected producer inflation data.
Stronger-than-expected inflation could prompt the Fed to adopt more hawkish language when it raises interest rates by 50 basis points on Wednesday. However, the Fed has warned that persistent inflation will cause U.S. borrowing costs to peak at higher-than-expected levels.
The Shanghai Shenzhen CSI 300 index and the Shanghai Composite index dropped by about 0.2% on Tuesday. Moreover, local markets are bracing for increased volatility shortly as they weigh the likelihood of additional relaxation of anti-COVID measures against the rise in cases.
This week’s due data on China’s fixed asset investments, industrial output, and retail sales should also provide more information about the nation’s stringent zero-COVID policy.