Asian stocks rally ahead of key US inflation data

US consumer price index (CPI) data will be released on Tuesday, with analysts expecting inflation to slow to 8%
Sep 13, 2022
<p>Stocks in Hong Kong gained, after reopening following a public holiday. PHOTO: AFP</p>

Stocks in Hong Kong gained, after reopening following a public holiday. PHOTO: AFP

Asian stocks continued a global rally on Tuesday morning, ahead of the release of key US consumer price data that is expected to show slightly slowing inflation in the world’s largest economy.

Stocks rose in Japan, Australia, Singapore and Taiwan at the open, with Hong Kong, South Korea and Shanghai also gaining after reopening following a public holiday.

US consumer price index (CPI) data will be released on Tuesday, with analysts expecting inflation to slow to 8%, driven mostly by falling gasoline prices. US inflation hit a 40-year high in June, touching 9.1%.

The ease in inflation, however, is unlikely to slow the pace of the US Federal Reserve’s tightening of monetary policy, with another 75-basis-point interest rate hike expected at its meeting next week.

The Fed has already instituted two consecutive rate hikes of that amount, and in recent days bank chief Jerome Powell has indicated that the increases will continue until inflation is tamed.

While the overall US inflation number is expected to slow, prices for food and housing are expected to have increased, raising the strain on household budgets.

“Risks remain skewed to the upside, due to an uncertain outlook for key inputs, including agricultural and energy commodities, as well as the pass-through of wage gains in a tight labour market,” according to Barclays US analysts Pooja Sriram and Jonathan Hill.

Last week, the European Central Bank also adopted a policy of monetary tightening, raising its key rate by a historic 75 basis points, with analysts expecting a similar-sized increase at the next policy meeting in October.

‘Locked in’

US stocks on Monday ended bullish: the broad-based S&P 500 advanced 1.1%, continuing the upswing last week that snapped a three-week losing streak.

“Wall Street is locked into Tuesday’s inflation report that will likely show pricing pressure relief but will not change the Fed from maintaining an aggressive stance of tightening monetary policy,” said Edward Moya, senior market analyst at OANDA.

“Even if inflation falls below the 8% level, the Fed should still deliver a 75-basis-point rate hike at the September 21st policy decision.”

The euro stabilised in early Asian trading to 1.0125 against the dollar on Tuesday, after a surge a day earlier that saw it gain 1.4% against the US currency and 1.6% against the yen, before paring those increases in later trading.

Oil prices on Tuesday were down by close to a percentage point, as investors continue to speculate on the effect of slowing demand in overheating major markets, especially in China, where a harsh zero-Covid policy continues to negatively affect economic activity.

In addition to US CPI figures on Tuesday, other key data expected later this week will include US retail sales and industrial production on Thursday; China home and retail sales as well as industrial production on Friday; and Euro area CPI, also on Friday.

Key figures at around 0230 GMT

  • Tokyo - Nikkei 225: UP 0.2% at 28,591.50

  • Hong Kong - Hang Seng Index: UP 0.3% at 19,425.88

  • Shanghai - Composite: UP 0.1% at 3,266.39

  • New York - Dow: UP 0.7% at 32,381.34 (close)

  • London - FTSE 100: UP 1.7% at 7,473.03 points (close)

  • Euro/dollar: UP at $1.0125 from $1.0120

  • Pound/dollar: UP at $1.1682 from $1.1680

  • Euro/pound: UP at 86.67 pence from 86.64 pence

  • Dollar/yen: DOWN at 142.52 yen from 142.82 yen

  • Brent North Sea crude: DOWN 0.8% at $93.26 per barrel

  • West Texas Intermediate: DOWN 0.8% at $87.12 per barrel

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