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Thursday, December 8, 2022

Despite global growth concerns, Asian stocks are rising

Asia stocks edge up despite global growth worries


SINGAPORE: Even though growing concerns regarding an economic slowdown and concerns regarding the pace of the Federal Reserve's interest rate hikes weighed on sentiment, Asian equities edged higher on Thursday, supported by stocks in Hong Kong and China.

After a two-day losing streak, MSCI's broadest index of Asia-Pacific shares outside of Japan was up 0.19 percent. The Hang Seng Index in Hong Kong increased by nearly 2% and China's stock market increased by 0.12%.

After the government made sweeping changes on Wednesday to ease a harsh anti-Covid policy that has harmed the world's second-largest economy, some investors booked profits in Chinese shares.

The S&P/ASX 200 index in Australia lost 0.67 percent, while the Nikkei fell to a near one-month low elsewhere in Asia.

As traders absorbed data indicating that US worker productivity rebounded in the third quarter at a slightly faster pace than initially thought, but the trend remained weak, keeping labor costs elevated, the market generally struggled to find direction.

Investors' appetite for risk has been lowered as a result of growing concerns that the US central bank might maintain a longer rate-hike cycle in light of reports of strong employment and service sector data.

The yields on five-year notes and 30-year bonds from the United States Treasury were at three-month lows, weighing on the stock market as well.

"I think that's what's driving most of the rest of the market," said Rob Carnell, head of ING's Asia-Pacific research. "The thing that stands out is what's going on in the US Treasury market. There doesn't seem to be a lot behind the moves."

"We may see some range trading ahead of the FOMC next week."

On Wednesday, Wall Street closed lower, with the benchmark S&P 500 falling for the fifth session in a row and the tech-heavy Nasdaq falling for the fourth day in a row.

When policymakers from the Federal Reserve, the Bank of England, and the European Central Bank meet next week, many in the market believe that bond yields have reached their peak and that inflation is slowing down.

After delivering four consecutive increases of 75 basis points, the Federal Reserve is widely expected to raise interest rates by 50 basis points next week.

By raising benchmark overnight interest rates by 50 basis points on Wednesday to 4.25 percent—the highest level in nearly 15 years—the Bank of Canada gave an indication that its historic campaign of tightening was coming to an end.

In the meantime, the 10-year Treasury note yield increased by 4.3 basis points (bps) to 3.451%, while the 30-year Treasury bond yield increased by 3.4 bps to 3.448%. On Wednesday, the yields on both notes fell to three-month lows.

The two-year yield on the US Treasury, which typically moves in line with expectations for interest rates, was 4.296%, up 3.9 basis points.

The dollar index increased by 0.171% in the foreign exchange market. The euro fell by 0.05 percent to $1.05, and sterling was last seen trading at $1.2184, down 0.12% on the day.

After falling to their lowest point this year, oil prices held steady in early Asian trade on Thursday.

Brent was at $77.79, up 0.8 percent for the day, while US crude was up 0.96% to $72.70 per barrel.

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