Bargain-buying helped most Asian markets recover some of this week’s steep losses, with investors tracking a rally on Wall Street and taking heart from a forecast-beating jobless claims report, though inflation fears continue to cast a dark cloud over trading floors.
Global equities have been convulsed for months by expectations that a blockbuster global recovery will send prices rocketing, forcing central banks particularly the Federal Reserve to taper the ultra-loose monetary policies that have helped drive a rally for more than a year.
Despite pledges from top central bank officials that the spikes are temporary owing to last year’s low base and that they will not move until unemployment is under control and inflation is running consistently hot, investors have been preparing for what they see as the inevitable.
That has seen them sell firms at risk from higher interest rates, such as in the tech sector, and buy those that benefit, like financials.
The scorching inflation narrative was reinforced this week with US consumer prices coming in far above estimates on Wednesday, followed by data Thursday showing the wholesale price index at its highest since comparable records began in 2010.
Still, after days of selling, investors were ready to jump back into the fold, analysts said, helped by the release of a report showing new jobless claims in the world’s top economy came in below expectations and fell to their lowest level since the pandemic began.
The Dow and S&P 500 both rose more than one percent, while the tech-rich Nasdaq also enjoyed healthy gains. The yield on benchmark 10-year Treasuries a key gauge of future inflation also eased.
Asia broadly followed suit, though the gains were not as convincing. Tokyo piled on 1.8 percent and the heavily tech-weighted Taipei index climbed 1.3 percent after suffering massive losses this week.
Hong Kong, Shanghai, Sydney and Seoul were also healthily up, though Singapore and Manila fell while Wellington was barely moved.
Observers said they remain upbeat.
“We see 10-year yields move up, we see inflation expectations move up, but as long as the underlying economic backdrop is still doing just fine it should power that value trade generally,” Lori Calvasina, of RBC Capital Markets, said on Bloomberg TV.
“We’re going to have some interesting days but the runway is there from an economic perspective for this rotation to keep going.”
Markets were also given a psychological boost after the US Centers for Disease Control and Prevention said people would not be required to wear a mask if they had been fully vaccinated, a key step on the slow road to recovery.
Crude prices extended Thursday’s losses of more than three percent as supply concerns eased after the Colonial Pipeline, the biggest in the United States, resumed deliveries following a shutdown in response to a cyber attack last Friday.
The fall was also fuelled by concerns about the possibility of central banks tightening monetary policy.
However, Vandana Hari, of Vanda Insights, said the commodity was “poised for a bounce as it looks oversold after Thursday’s plunge”.
“India’s persistent Covid crisis, and continuing flare-ups in other parts of Asia, are already baked in,” she added.
Key figures around 0230 GMT
Tokyo Nikkei 225: UP 1.8 percent at 27,940.90 (break)
Hong Kong Hang Seng Index: UP 0.5 percent at 27,853.05
Shanghai Composite: UP 0.4 percent at 3,444.56
euro/dollar: DOWN at $1.2081 from $1.2085 at 2040 GMT
Pound/dollar: DOWN at $1.4045 from $1.4054
euro/pound: UP at 86.02 pence from 85.95 pence
Dollar/yen: UP at 109.60 yen from 109.44 yen
West Texas Intermediate: DOWN 0.4 percent at $63.58 per barrel
Brent North Sea crude: DOWN 0.5 percent at $66.75 per barrel
New York Dow: UP 1.3 percent at 34,021.45 (close)
London FTSE 100: DOWN 0.6 percent at 6,963.33 (close)