MARKETS: Asia Rises – Mood Cautious Under US Inflation Figures

Asian stock markets were mostly rising on Wednesday.

China received higher-than-expected figures for rising producer prices. Later in the afternoon in Finnish time, the expected US inflation figures for April will be available. In the United States, inflation is forecast at 8.1 per cent year-on-year and core inflation at 6.0 per cent.

In Asia, the mood was raised in the morning by the improved pandemic situation in China, which is expected to lead to a relaxation of severe restrictions on movement.

In Tokyo, the Nikkei index was slightly green, but the broader TOPIX index fell 0.7 percent. The Hong Kong Stock Exchange’s Hang Seng Index was up 1.7 percent and mainland China was up 2 percent.

Car manufacturer Toyota reported a 33 percent year-on-year decline in earnings on Wednesday. Demand was stable and the weakening of the yen has supported the company’s exports, but production disruptions caused by chip shortages and China’s shutdowns messed up early in the year. Toyota’s share was down 4.5 percent.

In the foreign exchange market, movements were small under US inflation data. The dollar had weakened 0.1 percent in the morning against the euro, the pound and the yen.

The Chinese yuan had strengthened 0.2 percent against the dollar.

The euro received $ 1.0541 and the dollar 130.37 yen.

Higher-than-expected inflation in the United States could put pressure on the Federal Reserve to raise the policy rate by as much as 0.75 percentage points. Now the Fed is expected to raise the key interest rate at subsequent interest rate meetings by half a percentage point at a time.

Director of the Cleveland Fed Loretta Mester commented to Bloomberg that a one – off increase of 0.75 percentage points could not be ruled out.

However, market commentators also see an opportunity for inflation to be lower than expected.

“The bar is low for a surprise. Inflation may be slightly lower than expected. Then the pace of tightening of the Fed’s monetary policy could slow down, allowing stock markets to find supportive ground and rise in the coming months if inflation eases. ” Northwestern Mutual Life Insurancen investment strategy Brent Schutte outlined the situation to Bloomberg.

Index futures on European and U.S. stock markets were up about half a percent in the morning, anticipating a greening stock market opening.

By Editor