Traders are optimistic about the upcoming uncertainty in the markets. – Copyright GETTY IMAGES NORTH AMERICA/AFP SPENCER PLATT
Asian markets edged higher in early trading on Monday, buoyed by growth momentum in the US and Europe late last week as investors weigh in anticipation of further rate hikes aimed at curbing inflation.
Stocks in Japan, Australia, Singapore, Taiwan and Jakarta rose while markets in Hong Kong, China and South Korea were closed for the holiday.
The euro continues to strengthen against the dollar as investors in Europe weigh the outlook for the European Central Bank (ECB), following the lead of the US Federal Reserve and raising key rates.
On Sunday, German central bank president Joachim Nagel signaled that the ECB is likely to keep raising interest rates to curb runaway inflation.
Nagel predicted that inflation in Europe could peak over 10 percent in December.
The ECB raised its key rate by a historic 75 basis points last week and markets are expecting a similar hike at the October meeting.
Investors around the world will be keeping a close eye on U.S. inflation data for August this week, due on Tuesday, with the Consumer Price Index (CPI) expected to ease slightly to eight percent, still well above target. Fed at two percent.
Traders expect the Fed to make another significant rate hike next week, after two 75 basis point hikes already.
“The unexpected decline in the US CPI is likely more worrying and could lead to further dollar weakness,” Charu Chanana, strategist at Saxo Capital Markets, told Bloomberg Television.
“We saw some glimpses of this… towards the end of last week. It could potentially be risky, especially this week.”
– Hopes for a “soft landing” –
On Sunday, US Treasury Secretary Janet Yellen said she hopes the US economy can avoid a recession, but that the Fed needs to manage interest rates skilfully and also rely on “luck to achieve what we sometimes call a soft landing.”
“I hope we get a soft landing, but Americans know it’s important to keep inflation down and we can’t have a strong labor market in the long run without inflation being controlled,” she told CNN.
Yellen said that while the US economy is slowing down, the job market remains “exceptionally strong” with nearly two jobs for every job seeker.
In addition to the US CPI data on Tuesday, traders will be keeping a close eye on the UK CPI on Wednesday, as well as European CPI and Chinese home sales, retail sales and industrial production data on Friday.
In Tokyo, stock indices opened higher on Monday, helped by the positive mood of market participants amid last week’s rise and the weakening of the yen.
The dollar was worth 142.65 yen in early Asian deals against 142.56 yen on Friday in New York.
“A lower yen is positive for corporate performance despite recent media reports” that highlight the negative aspects of a weak yen, said Masayuki Kubota, chief strategist at Rakuten Securities.
On Friday, Bank of Japan Governor Haruhiko Kuroda met with Prime Minister Fumio Kishida, saying that a rapid weakening of the currency was “undesirable”, signaling possible forthcoming action to stop the fall.
– Key figures around 03:00 GMT –
Tokyo – Nikkei 225: up 1.1% to 28,528.90.
Hong Kong – Hang Seng Index: up 2.7% to 19,362.25 (closed on Monday due to public holiday)
Shanghai – Composite: up 0.8% to 3262.05 (closed due to public holiday on Monday)
New York-Dow: up 1.2% to 32,151.71 (close)
New York – S&P 500: up 1.5% to 4067.36 (close)
New York-Nasdaq: up 2.1% to 12,112.31 (close)
London – FTSE 100: up 1.2% to 7,351.07 (close)
Frankfurt – DAX: Up 1.4% to 13,088.21 (close)
Paris – CAC 40: up 1.4% to 6,212.33 (close)
EURO STOXX 50: up 1.6% to 3570.04 (close)
EUR/USD: rose to $1.0085 from $1.0046.
Pound/dollar: rose to $1.1609 from $1.1587.
Euro/pound: up 86.86p from 86.84p.
Dollar/yen: above 142.65 yen from 142.56 yen.
Brent North Sea Oil: REDUCED 1.4% to $91.57 a barrel
West Texas Intermediate: REDUCED 1.5% to $85.49 per barrel