Asian markets continue to rally as fears of rate hikes ease – AFR

Asian markets rallied again on Monday, building on last week’s gains and a strong performance on Wall Street as speculation that inflation may have peaked dampened expectations of central bank rate hikes.

With prices rising at a pace not seen in a generation, CFOs have been forced to hike borrowing costs and scale back ultra-loose monetary policy in recent months, sending stock markets cold.

But a string of weak data has led many investors to believe inflation may have plateaued or is about to, giving banks room to be less hawkish.

The prospect of interest rates not coming in as high as originally expected helped Wall Street stocks surge higher on Friday, with the S&P 500 and Nasdaq finishing up more than 3 percent.

And Asia continued last week’s rally.

Hong Kong led the gainers, rising more than two percent on a strong performance by Chinese tech companies. Evidence that China’s crackdown on the sector may be coming to an end contributed to positive sentiment in the city.

Tokyo, Shanghai, Seoul, Singapore, Sydney, Manila and Wellington were also doing well.

“Market belief that the Fed may not hike rates as aggressively now as previously feared and/or that rate cuts ahead of late 2023 are now an even more realistic prospect as recession-like conditions loom has played a large role in improving risk sentiment in last week,” said Ray Attrill of National Australia Bank.

He added that the rally helped erase about two-thirds of losses sustained in a painful June 9-16 sell-off.

As Fed chairmen continue to announce more big rate hikes in the pipeline, expectations for an extended period of rate hikes have faded, which in turn has taken some of the warmth out of the dollar.

Bitcoin has also gained some support after last week falling as low as $17,600 for the first time since December 2020.

“There’s a feeling that things aren’t as bad as we thought,” Pepper International’s Carol Pepper told Bloomberg Radio.

“There’s hope that maybe we’ve oversold, maybe there won’t be a recession,” she said.

Tokyo – Nikkei 225: up 1.0 percent at 26,768.77 (breakthrough)

Hong Kong – Hang Seng Index: up 2.7 percent to 22,297.74

Shanghai — Composite: up 0.8 percent to 3,377.22

Dollar/Yen: DOWN at 134.63 yen from 135.17 yen late Friday

Pound/dollar: rise to $1.2282 from $1.2280

Euro/dollar: rise to $1.0563 from $1.0559

Euro/Pound: UP at 86.01p from 85.95p

West Texas Intermediate: FALSE, up 0.2 percent at $107.41 a barrel

North Sea Brent Crude: FLAT at $113.10 a barrel

New York – Dow: up 2.7 percent at 31,500.68 (close)

London – FTSE 100: up 2.7 percent at 7,208.81 (close)