Thursday, November 21

Asian Stock Market are Up, Japan’s Nikkei Strengthens

TOKYO, 11th Jan 2023 – Asian shares were mostly higher on Wednesday off a rally on Wall Street that came ahead after the weaker yen also boosted buying sentiment in Japan, as the country’s exporters earn more when foreign profits are converted into yen.

Japan’s benchmark Nikkei 225 NIK, +0.99% rose 1% in morning trading. Australia’s S&P/ASX 200 XJO, +0.95% gained about 1% and South Korea’s Kospi 180721, +0.17% gained about 0.2%. Hong Kong’s Hang Seng HSI, +1.02% climbed 1%, while the Shanghai Composite SHCOMP, +0.20% rose 0.2%. Benchmark indices in Taiwan Y9999 fell -0.34%, Malaysia FBMKLCI, +0.10% and Indonesia JAKIDX, -0.48%, while Singapore STI stocks gained +0.30%.

Shares of Fast Retailing Co. 9983, +1.23%, which operates popular Japanese clothing retailer Uniqlo, rose 1.4% in morning trade after the company announced it was increasing its employees’ salaries by up to 40% .

The move is aimed at “significantly strengthening its investment in personnel, remunerating each employee fairly for their ambition and talent, as well as enhancing the company’s growth potential and competitiveness,” the company said in a statement.

On Wall Street, the S&P 500 SPX, + 0.70% rose 0.7% to 3,919.25, drifting between smaller gains and losses throughout the day. The Dow Jones Industrial Average DJIA, +0.56% rose 0.6% to 33,704.10 and the Nasdaq Composite Comp, +1.01% climbed 1% to 10,742.63.

The stock market has started 2023 on a positive note, helped by hopes that cooling inflation and a slowing economy could persuade the Federal Reserve to reduce interest rate hikes. The Fed has been raising rates at a furious pace since the beginning of last year to bring painful inflation under control. Such moves lead to recession and hurt the prices of investments.

Jerome Powell, who spoke at a forum in Stockholm on Tuesday, said investors were hoping for some clues about where the Fed is going from its chair. But he gave little information on rates.

The next big event for the markets is likely to be Thursday’s update on December US inflation at the consumer level. Economists expect it to slow to 6.5% from 7.1% in November and to 6.5% from a peak of more than 9% in the summer.

The worse-than-expected reading could dash building hopes on Wall Street that the Fed could soon halt its hikes and perhaps even cut rates by the end of the year. Some investors see the economy moving slowly enough to successfully stave off high inflation, but not so much as to cause a painful recession.

Previous rate hikes and high inflation have already hurt economic activity around the world, and the Fed has promised to keep rates high for a while to ensure inflation is contained. It does not envisage any rate cuts till 2024.

The World Bank said in its annual report on Tuesday that the global economy will come “dangerously close” to recession this year.

It usually takes some time for a rate hike to be felt fully in the economy. Barry Bannister, chief equity strategist at Stifel, said it could reverse the downturn in the second half of the year. Strengthening China may also benefit the global economy as it lifts restrictions put in place to keep COVID-19 at bay, but it also hurts its economy.

“You’re looking at a pretty good six months where things get better on the margin and then the trouble starts,” Bannister said.

Meanwhile, big US companies will start showing investors this weekend how much profit they made during the last three months of 2022. Sizzling inflation is squeezing the wallets of customers and driving up costs for businesses, threatening their earnings.