Hong Kong (China) (AFP) – Markets drifted in Asia on Wednesday, as investors tried to navigate an uncertain economic landscape as central banks raised interest rates to combat runaway inflation, which in turn fueled fears of a possible recession.
But while officials at the Federal Reserve and its peers are expected to continue tightening monetary policy for the rest of the year, talk is growing that they will be able to loosen in 2023 — and perhaps even cut interest rates — if the pace of prices picks up. goes down.
The minutes of the Federal Reserve’s July meeting will be up when they are released later in the day, as investors hope to get insight into the thinking of policymakers and an idea of his plan for next month’s gathering.
“We expect … the minutes to have a strong slope,” said Carol Kong of the Commonwealth Bank of Australia. “We wouldn’t be surprised if the minutes showed (officials) took into account a 100 basis point increase in July.”
The bank raised interest rates by 75 points in June and July.
Better-than-expected earnings from retail giants Walmart and Home Depot provided optimism that US consumers remain resilient even as inflation continues to rise and borrowing costs increase.
However, Asia has struggled to match the positive leadership from Wall Street, with concerns about the Chinese economy dampening appetite.
The country’s central bank announced a surprise interest rate cut on Monday and a report on Tuesday said Premier Li Keqiang called on six major provinces – which account for about 40 percent of the economy – to step up pro-growth policies.
However, analysts said markets are more concerned about the debilitating effect of lockdowns and other stringent containment measures being implemented as part of the government’s strategy to combat the coronavirus.
“Visibility on the evolution of China’s no-Covid policy is low, and recent messages have indicated that containing the virus remains a top political priority for the country,” said Adam Montanaro, investment director for global emerging equity markets at abrdn.
“Not only do investors hate uncertainty, but the negative economic impact of this policy is increasingly evident.”
Hong Kong was steady and Shanghai retreated, while there were also losses in Seoul and Wellington.
Shares of Tokyo, Singapore, Taipei and Manila rose.
Stocks have enjoyed several weeks of gains since bottoming out in June, and while the initial rebound was widely seen as a bear market rally, there is hope that it may have already hit rock bottom.
“It looks like a bottom, works like a bottom, trades like a bottom, it’s probably a bottom,” OANDA’s Edward Moya said in a note.
“Calls for a bear market rally are suddenly quiet these days. The risks of the Fed pushing the economy into recession are diminishing as inflation slowly declines.
“It looks like the Fed’s soft landing is achievable and that has allowed this rally to continue.”
– Key numbers around 0230 GMT –
TOKYO – Nikkei 225: up 0.8 percent to 29101.33 (break)
Hong Kong – Hang Seng Index: FLAT at 19837.16
Shanghai – Composite: down 0.4% at 3,263.71
West Texas Intermediate: up 0.3 percent at $ 86.78 a barrel
Brent North Sea crude: up 0.2% to $92.51 a barrel
EUR/USD: up at $1.0174 from $1.0166 on Tuesday
Pound/dollar: rose at $1.2108 from $1.2092
EUR/GBP: DOWN at 84.01 pence from 84.04 pence
USD/JPY: Decreased at 134.06 yen from 134.21 yen
New York – Dow Jones: up 0.7 percent at 34152.01 (close)
London – FTSE 100: up 0.4 percent at 7536.06 (close)
– Bloomberg News contributed to this story –