Asian markets rose on Friday after recession fears eased amid growing hopes Joe Biden will lift some Trump-era tariffs on Chinese goods.
The buying was also spurred by reports that Beijing is considering giving the struggling economy a huge stimulus by allowing local governments to raise billions of dollars through bond issuance for infrastructure projects.
However, rising inflation, rising interest rates and a renewed flare-up of Covid infections in Shanghai continued to keep investor sentiment grounded.
Traders got a strong lead from Wall Street, where all three major indices rose for the fourth straight day, helped by two senior Federal Reserve officials who said the economy could withstand stronger rate hikes and sustain growth.
There is growing talk that the rapid pace of monetary tightening across the board will plunge the world’s leading economy into recession.
But Christopher Waller, a member of the Board of Governors, said the worries were overdone and a strong labor market would provide a buffer, adding that interest rates need to rise sharply and quickly.
St. Louis Fed President James Bullard also said there was “a good chance of a soft landing.”
And BMO Capital Markets’ Brian Belski agreed that fears of a recession had gone too far.
“I’m calling this time a recession obsession right now,” he told Bloomberg Television. “Institutional investors are not positioned for any upside. That’s why you see these strong moves on a day like (Thursday). We stay positive and think people are way too negative.”
On more positive sentiment, Asian stocks rose with Hong Kong, Shanghai, Tokyo, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta all in the green.
– weak labor market –
The Fed’s policy plans will take center stage later on Friday when the US payrolls data is released, with a strong result from the central bank providing evidence it is sticking to its hawkish stance.
But StoneX Financial’s Matt Simpson said there were signs the job market could show signs of weakness.
The report “is unlikely to stop the Fed from hiking 75 basis points this month. But as valuable nonfarm payrolls begin to crumble, so does the Fed’s argument that the US economy is resilient,” he said.
“And we’re seeing early signs of that across multiple employment metrics.”
“If we see unemployment start to rise and headline job growth lose momentum, it will be difficult for the Fed to ignore it,” he added.
“And that could be a reason for the Fed to at least pause its growth cycle, because a crumbling labor market is great for deflation. So I would expect market fireworks if and when (non-farm payrolls) start to disappoint.”
Biden is reportedly scheduled to hold a meeting with top advisers later on Friday to discuss whether or not to lift some of the Trump-era tariffs imposed on about $300 billion worth of Chinese imports .
While he is also reportedly considering further examining other facets of Beijing’s trade policy, analysts said the elimination of the levy could boost China’s export growth to the United States by about 20 percent.
The move could also help ease upward pressure on US inflation, which is at a four-decade high.
Sterling extended Thursday’s rally, which came after Boris Johnson resigned as leader of the ruling Conservatives, paving the way for a new Prime Minister and ending weeks of political uncertainty in the UK.
The euro remained stuck at a 20-year low against the greenback after minutes from the European Central Bank’s latest meeting suggested that unlike the Fed, it was happy to hike rates at a slower pace despite rising inflation.
– Key figures at 0245 GMT –
Tokyo – Nikkei 225: up 1.4 percent at 26,869.82 (breakthrough)
Hong Kong – Hang Seng Index: up 0.9 percent to 21,841.61
Shanghai — Composite: up 0.5 percent at 3,381.11
Pound/dollar: rise to $1.2041 from $1.2024 on Thursday
Euro/dollar: rise to $1.0173 from $1.0162
Euro/Pound: DOWN at 84.46p from 84.49p
Dollar/Yen: DOWN at 135.72 yen from 136.01 yen
West Texas Intermediate: FALSE, up 0.3 percent at $102.43 a barrel
North Sea Brent Crude: FALSE, up 0.2 percent at $104.49 a barrel
New York – Dow: up 1.1 percent at 31,384.55 (close)
London – FTSE 100: up 1.1 percent at 7,189.08 (close)
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