Hong Kong – Asian markets on Thursday tracked a Wall Street rally fuelled by healthy economic and earnings data, while there was some relief that Nancy Pelosi’s Taiwan trip did not elicit a harsher response from China despite grave warnings from Beijing.
Oil managed to clock up some gains following another sell-off that came on the back of fresh signs of weakening demand in the United States, which came as major producers announced an increase in output, albeit a small one.
New York’s three main indexes surged after a report on the crucial US services sector showed surprise improvement, soothing worries about a possible recession in the world’s top economy.
That came as several companies — including Electronic Arts, Starbucks and Moderna — posted strong earnings, extending a broadly positive reporting season in the face of surging inflation and rising interest rates.
All eyes are now on the release of US jobs data Friday, which will provide the latest snapshot of the economy and could help guide the Federal Reserve in its debate on monetary policy.
Markets have swung this week after a number of Fed officials lined up to suggest there were still some big rate hikes likely and talk of cuts next year might be overdone.
That came after comments last week from bank chief Jerome Powell indicated that the policy board could start easing up on its tightening campaign.
“Following last week’s Fed meeting that opened up the possibility of a slower hiking pace, markets are still running ‘risk-on’ despite the recent push back from Fed officials,” said SPI Asset Management’s Stephen Innes.
“But for stock investors, lower oil prices are a pleasure to behold as not only did the US 10-year yields drop but sliding oil prices also downshifted inflation expectations, supporting that slower hiking pace thesis.”
Both main oil contracts edged up Thursday, a day after prices tumbled to a six-month low as a spike in US inventories showed demand waning, while figures showed Americans driving less than summer 2022 when travel was smashed by Covid-19.
Crude has now given up all the gains seen in the aftermath of Russia’s invasion of Ukraine, though the 100,000 barrel output increase by OPEC+ was brushed off by investors as too little to make an impact.
The mood in Asia was also a lot more settled after the upheaval of this week’s visit to Taiwan by House Speaker Pelosi, which sparked outrage in China with warnings of stern military and economic responses.
While Beijing suspended a limited amount of cross-strait imports and exports and embarked on its largest-ever military exercises encircling Taiwan, Asian investors felt a sense of relief it did not go further.
Hong Kong led gains, adding more than two percent, while there were also advances in Shanghai, Tokyo, Sydney, Seoul, Jakarta and Wellington.
However, Taipei fell again on worries that the Chinese manoeuvres would hit shipping lanes and flights into Taiwan.
Singapore and Manila also dipped.
Pelosi’s trip managed to further strain already-fraught China-US relations, and markets strategist Louis Navellier said “it will be interesting if China retaliates against any US companies or restricts trade in any manner”.
– Key figures at around 0230 GMT –
Tokyo – Nikkei 225: UP 0.5 percent at 27,892.68 (break)
Hong Kong – Hang Seng Index: UP 2.1 percent at 20,182.31
Shanghai – Composite: UP 0.8 percent at 3,188.86
Dollar/yen: DOWN at 133.70 yen from 133.92 yen Wednesday
Euro/dollar: DOWN at $1.0166 from $1.0172
Pound/dollar: UP at $1.2151 from $1.2149
Euro/pound: DOWN at 83.67 pence from 83.71 pence
West Texas Intermediate: UP 0.6 percent at $91.19 per barrel
Brent North Sea crude: UP 0.5 percent at $97.29 per 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)