Asian stock markets rose on Friday as the shock of a high inflation reading in the United States have faded, giving investors hopes that the worst price hikes are nearing an end.
MSCI’s broadest index of Asia-Pacific stocks outside of Japan rose 0.7 percent to its highest level in two weeks, while Japan’s Nikkei stocks rose 1.1 percent.
After a mixed session on Thursday, when the S&P 500 ended up 0.06 percent higher and the tech-heavy Nasdaq rose 0.52 percent, U.S. stock futures were up about 0.3 percent.
Following a surprisingly strong reading on US inflation, world stock prices fell the most in over a month on Wednesday.
In October, the consumer price index in the United States increased by 6.2 percent year-on-year, the highest increase since November 1990.
‘Inflation is obviously a danger to be aware of. Stock prices, on the other hand, will only experience a significant drop if the Federal Reserve proves to be completely wrong in its assessment and is forced to raise interest rates rapidly. That is not the case right now,’ Norihiro Fujito, chief investment strategist at the Mitsubishi UFJ Morgan Stanley Securities shared his views.
While the inflation data suggested that the current wave of price spikes caused by chronic global supply constraints may last longer than many had anticipated, many investors believe that the inflationary pressure will gradually ease rather than strengthen.
‘If we get through the year-end holiday shopping season, when demand should be peaking,’ Hirokazu Kabeya, chief global strategist at Daiwa Securities, said, indicating that perhaps the inflation could subside.
‘This year’s holiday sales in the United States are expected to increase by 8.5 percent to 10 percent, with some shoppers starting to shop earlier than usual due to concerns about supply shortages. If that is the case, next week’s retail sales report could be quite strong, which would be good news for stocks,’ he added.
The October retail sales report for the United States is due next Tuesday.
After a market holiday on Thursday, bond yields increased slightly, with the 10-year U.S. Treasury yield rising 1.9 basis points to 1.572 percent on Friday.
The dollar held firm in the currency market after Wednesday’s U.S. inflation reading that fuelled expectations that the Fed would tighten monetary policy sooner than expected.
The dollar index against six other currencies hit a 16-month high of 95.264, while the euro fell to $1.1449, its lowest level since July last year.
The yen weakened to 114.26 per dollar, close to a four-year low which was hit last month, while also the commodity currencies like the Australian and Canadian dollars fell significantly.
The Australian dollar fell to $0.7286 per dollar, a five-week low, while the Canadian dollar fell to C$1.2588 per dollar, a low not seen since early October.
‘It is interesting if a growing number of investors are selling commodity currencies on the assumption that Fed tightening will lower commodity prices,’ said Makoto Noji, the chief FX strategist at SMBC Nikko Securities.
Oil prices fell slightly as the market dealt with concerns about rising inflation in the United States, as well as after OPEC cut its 2021 oil demand forecast due to high prices.
Brent crude futures fell 0.36 percent to $82.56 per barrel, while WTI futures in the United States fell 0.33 percent to $81.32 per barrel.
As investors sought inflation hedges, gold prices remained near five-month highs. They were last trading at $1,862 per ounce, close to the high of $1,868.5 set on Wednesday.
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