Asian Stocks Turn Risk-On Ahead of U.S. CPI Reading!
Asian stock markets rose on Monday as investors awaited further signs that US inflation is slowing, and tech stocks are struggling to gain momentum.
The weakness of the US dollar, as it retreated from a 20-year high, also contributed to the risk of starvation. But public holidays in Hong Kong and China kept business prices in the region muted.
Taiwan’s tech-heavy index was the region’s top performer, up 1.8%. Indices in Japan and Australia rose more than 1% each.
The Philippines PSEi Composite was the best performer in Southeast Asia, rising 1.2%. Local stocks got a positive signal from the rally on Wall Street on Friday, while major US stocks snapped a three-week losing streak. Technology stocks, which have benefited from rising US interest rates this year, were the best performers. Investors are awaiting US consumer price index (CPI) data for August, due on Tuesday. The reading should show that US prices have fallen further from the 40-year highs reached earlier this year. The weak reading is expected to prolong the market rally, as it will indicate that the Federal Reserve’s tight interest rate this year is working as expected.
Lower inflation will eventually ensure that the Fed slows down the pace of rate hikes. But the Fed has indicated that rates will continue to increase sharply in the near term. Markets are paying more than 90% chance that the central bank will raise rates by 75 basis points – the upper limit of expectations – when it meets next week.
Rising interest rates have hurt Asian stock markets this year as they narrowed the gap between returns for high- and low-income investments. Technology infrastructure paid for these sales. But slowing inflation in the U.S. could help reduce expectations of higher interest rates, which should translate to equity markets.
Asian stock markets are still struggling with slowing economic growth in China, the region’s biggest trading hub. Imports of goods are expensive, due to the strong dollar, and are expected to be key for the economy in the near term.