Stocks rise as markets bet on more gradual price increases

Pedestrians wearing protective face masks walk past an electronic board showing Japan’s Nikkei average share, amid the coronavirus (COVID-19) pandemic, in Tokyo, Japan, July 14, 2022. REUTERS/Issa Kato

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SINGAPORE (Reuters) – Asian stocks followed suit on Friday from a late rally on Wall Street, as markets focused on a possible slowdown in the pace of interest rate hikes rather than a U.S. recession after data showed its economy shrank for a second. straight quarter.

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) It rose 0.41%. Average Share of Japan’s Nikkei Index (.N225) Seoul index opened up 0.36% (.KS11) and the Australian Index (.AXJO) Open 0.75% and 0.76%, respectively.

Economists debate whether the world’s largest economy is already in or on the verge of recession, as it struggles with its highest rate of inflation in four decades and gross domestic product is shrinking — at a 0.9% annual rate last quarter, after a 1.6% contraction in the United States. before that quarter. Read more

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The Federal Reserve raised the interest rate by 75 basis points this week, its third this year.

Meanwhile, China, still in the midst of COVID-19 outbreaks and lockdowns, did not mention its full-year GDP growth target after a high-level Communist Party meeting, instead saying it would try hard to achieve the best possible outcomes for the economy. this year. Read more

However, US stocks rose this week as comments from Federal Reserve Chairman Jerome Powell led to speculation that rate hikes will start to slow and eventually turn into interest rate cuts in 2023. Amazon Shares (AMZN.O) hail (AAPL.O) It rose 12% and 3% each hours after the tech giants reported better-than-expected earnings.

Dow Jones Industrial Average (.DJI) The index rose 332.04 points, or 1.03%, to 32529.63 Standard & Poor’s 500 (.SPX) It rose 48.82 points, or 1.21%, to 4,072.43 points, and the Nasdaq Composite (nineteenth) It added 130.17 points, or 1.08%, to 12,162.59 points.

But analysts warned that the rally could be short-lived.

“Financial markets have taken a combination of … (the Fed) announcement and … a negative US GDP reading as confirmation that policy makers will ease the cycle of tight monetary tightening before too long. However, our sense is that such Hopes Capital Economics said in a note that some of the prevailing trends this year, notably the rise of the US dollar, will reassert themselves before long.”

The dollar remained near a six-week low against the yen for similar reasons, trading at 134.39 yen, up 0.13% after falling overnight by 1.74%, the largest drop since March 2020. It touched its lowest level at 134.2 on Thursday, the weakest since That moment. June 17. read more

US Treasuries slipped on the back of weak economic data, with the yield on the benchmark 10-year Treasuries slipping to 2.6759%. The two-year bond yield, which is usually in line with interest rate expectations, was at 2.8703%.

“There is this swing right now with inflation and growth concerns,” said Tom Nash, fixed income portfolio manager at UBS Asset Management in Sydney, with surprisingly weak growth numbers in the US focused on the latter.

“When it comes to inflation concerns, returns go up, and when it comes to growth, returns go down. What we’re seeing right now is that the market is putting less focus on inflation and more on growth.”

Brent crude futures rose 0.8 percent to $ 108 a barrel, and US West Texas Intermediate crude rose 1.08 percent to $ 97.46.

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Additional reporting by Tom Westbrook. Editing by Richard Boleyn

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