Hong Kong, China (AFP) – Asian shares largely extended their global rally on Tuesday, ahead of key US consumer price data expected to show a slight slowdown in inflation in the world’s largest economy.
Shares rose in Japan, Australia, Singapore and Taiwan, and South Korea and Shanghai also gained after reopening after a public holiday. European stocks were flat at the open.
Hong Kong shares fell at the close, giving up modest gains made earlier in the day.
US Consumer Price Index (CPI) data will be released on Tuesday, with analysts expecting inflation to slow to eight percent, mostly driven by lower gasoline prices. The US inflation rate hit a 40-year high in June, touching 9.1 percent.
However, easing inflation is unlikely to slow the pace of the US Federal Reserve’s tightening of monetary policy, with a 75 basis point rate hike expected at its meeting next week.
The Fed has already raised interest rates twice in a row by that amount, and in recent days Chairman Jerome Powell has indicated that the increases will continue until inflation is tamed.
While the overall inflation figure in the US is expected to slow, food and housing prices are expected to rise, putting more pressure on household budgets.
According to US analysts Pooja Sriram and Jonathan Hill at Barclays, “risks remain skewed to the upside, due to uncertain expectations for key inputs, including agricultural and energy goods, as well as the passage of wage gains in a tight labor market.” .
Last week, the European Central Bank also adopted a policy of tightening monetary policy, raising its key interest rate by a historic 75 basis points, with analysts expecting a similar increase in size at the next policy meeting in October.
– ‘Imprisoned’ –
In Tokyo, stocks closed higher on Tuesday, as investors finished the session cautiously paring some gains as the Nikkei rose in recent days.
Broker Okasan Online Securities said investors are looking to “balance their positions” ahead of US CPI data.
Seoul led the day’s gains in Asia, which rose 2.7 percent on Tuesday.
US stocks ended higher on Monday: the broad-based S&P 500 advanced 1.1 percent, continuing the rally last week that cut a three-week streak of losses.
“Wall Street is locked in Tuesday’s inflation report which is likely to show an easing of pricing pressure but will not alter the Fed from maintaining a strong stance on monetary tightening,” said Edward Moya, chief market analyst at OANDA.
“Even if inflation drops below 8 percent, the Fed will still have to raise interest rates by 75 basis points in its September 21 policy decision.”
The euro settled at $1.0143 against the dollar on Tuesday, after a rally the previous day that saw it gain 1.4 percent against the greenback and 1.6 percent against the yen, before paring those increases in later trading.
Oil prices rose on Tuesday – after the initial drop in the Asian morning – as the dollar’s weakness offset some concerns about destroying demand.
Other key data later this week is expected to include US retail sales and industrial production on Thursday. China’s home and retail sales as well as industrial production on Friday; The Eurozone CPI is also on Friday.
– Key numbers around 0815 GMT –
TOKYO – Nikkei 225 index: up 0.3 percent to 28614.63 (close)
Hong Kong – Hang Seng Index: down 0.2 percent at 19,326.86 (close)
Shanghai – Composite: up 0.1 per cent at 3,263.80 (close)
New York – Dow Jones: up 0.7 percent at 32,381.34 (close)
London – FTSE 100: up 0.1 per cent to 7,480.97 points
Frankfurt – DAX: up 0.3 percent to 13437.53 points
Paris – CAC 40: up 0.6 percent at 6,369.77 points
Euro Stoxx 50: up 0.5% to 3664.98 points
EUR/USD: up at $1.0143 from $1.0120
Pound/dollar: rose at $1.1717 from $1.1680
EUR/GBP: DOWN at 86.57 pence from 86.64 pence
Dollar / yen: down at 142.28 yen from 142.82 yen
Brent North Sea crude: up 1% to $94.98 a barrel
West Texas Intermediate: up 1.1% at $88.73 a barrel