Asian markets followed a Wall Street rally Thursday, fueled by healthy economic and earnings data, while there was some relief that Nancy Pelosi’s trip to Taiwan did not provoke a harsher reaction from China, despite dire warnings from Beijing.
Oil posted some gains after another sell-off on fresh signs of weak demand in the United States, as major producers announced an increase in production, albeit small.
New York’s three main indices rose sharply after a report on the crucial US services sector showed surprising improvement and allayed concerns about a possible recession in the world’s largest economy.
This came as several companies — including Electronic Arts, Starbucks and Moderna — reported strong earnings and extended a largely positive earnings season amid rising inflation and rising interest rates.
All eyes are now on Friday’s release of US jobs data, which will provide the latest snapshot of the economy and could help the Federal Reserve in its monetary policy debate.
Markets faltered this week after a number of Fed officials indicated that some large rate hikes were still likely and talk of next year’s rate cuts may be overdone.
This comes after comments from bank chief Jerome Powell last week suggested the political board could begin to ease its tightening campaign.
“Following last week’s Fed meeting, which raised the possibility of a slower rate hike pace, despite recent pressure from Fed officials, markets are still ‘risk on’,” said Stephen Innes of SPI Asset Management.
“But for equity investors, lower oil prices are a delight to behold, as not only have 10-year Treasury yields fallen, but falling oil prices have pushed down inflation expectations, supporting the thesis of a slower pace of growth.”
Both major oil contracts rose on Thursday, a day after prices fell to a six-month low, as a surge in U.S. inventories showed slacking demand, while figures showed Americans are driving less than in the summer of 2022, when Covid-19 travel 19 was destroyed.
Crude oil has now given up any gains made following the Russian invasion of Ukraine, although OPEC+’s 100,000 barrel increase in production was dismissed by investors as too small to make an impact.
Sentiment in Asia was also much calmer following the uproar of Pelosi’s visit to Taiwan this week, which sparked outrage in China with warnings of harsh military and economic responses.
As Beijing suspended a limited amount of cross-strait imports and exports and launched its largest-ever military drill around Taiwan, Asian investors felt relieved that things didn’t go any further.
Hong Kong led gains, up more than 2 percent, while there were also advances in Shanghai, Tokyo, Sydney, Seoul, Jakarta and Wellington.
However, Taipei again shrugged off concerns that the Chinese maneuvers would affect shipping routes and flights to Taiwan.
Singapore and Manila also declined.
Pelosi’s trip managed to further strain already strained China-US relations, and market strategist Louis Navellier said, “It will be interesting to see if China retaliates against US companies or restricts trade in any way.”
– Key figures at 0230 GMT –
Tokyo – Nikkei 225: up 0.5 percent at 27,892.68 (breakthrough)
Hong Kong – Hang Seng Index: up 2.1 percent to 20,182.31
Shanghai — Composite: up 0.8 percent to 3,188.86
Dollar/Yen: DOWN at 133.70 yen from 133.92 yen on Wednesday
Euro/Dollar: DOWN at $1.0166 from $1.0172
Pound/dollar: rise to $1.2151 from $1.2149
Euro/Pound: DOWN at 83.67p from 83.71p
West Texas Intermediate: up 0.6 percent to $91.19 a barrel
North Sea Brent Crude: up 0.5 percent to $97.29 a barrel
New York – Dow: up 1.3 percent at 32,812.50 (close)
London – FTSE 100: up 0.5 percent at 7,445.68 (close)
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