SINGAPORE – Asian stock markets released their fourth consecutive profit session on Wednesday, but the recent rally has lost momentum amid worrying skepticism about inflation and printed bits and pieces of good news about the outlook for global growth.
Outside of Japan, the broader MSCI index of Asia-Pacific shares rose 0.5% and is the longest winning trend since February. Japan’s Nikkei rose 0.6% and miners Australia’s shares rose nearly 0.9%.
Love follows a surge on Wall Street and the dollar’s recession as investors push concerns about inflation and recession into their minds.
However, analysts doubted that it could be sustainable, and both the greenback and the future in Asia were stable. S&P 500 futures are down 0.2%, Nasdaq 100 futures are down 0.4% while FTSE futures are flat and European futures are up 0.2%.
Shane Oliver, chief economist and head of investment strategy at AMP Capital Australia, said:
“But the risks surrounding inflation, fiscal austerity, the war in Ukraine and Chinese growth are high and still point to a worsening of the stock market,” he said.
Australian wage growth is helped by the missing forecast, with the dollar holding firm after an overnight kick, pushing the Aussie dollar below $ 0.70 briefly.
The greenback was steady at $ 1.0534 in the euro and gave a strong bounce break for Sterling at $ 1.2480 following hard labor data on Tuesday.
Inflation figures in the UK and Canada could change rate expectations even after Wednesday and move currencies. The dollar index is at 103.370.
“Long-term peaks in the dollar are still too early and retreats should be shallow,” said Westpac analysts. “But some bilateral consolidation between 102-104 is probably near term,” they added, referring to the dollar index.
Positive data helped boost short-term mood, with US retail sales forecasting a strong growth in April and losing industrial production expectations.
Wednesday’s data showed that Japan’s economy contracted less than expected in the first quarter.
Shanghai is also nearing the end of its protracted lockdown and has made calm remarks to technology executives in the latest sign of easing pressure on China’s vice-premier.
However, any good news was offset by a reminder from Federal Reserve Chair Jerome Powell that there would be a demand for a rate hike to control inflation and there would probably be some pain.
Investors set the price at a 50 basis point US rate hike in June and July, and see the benchmark Fed fund rate knocking 3% early next year.
All tenor treasuries were sold on Tuesday in anticipation of rising rates, but the yield gap between short- and long-term bonds is narrowing as market prices are a risk that will push growth to long-term growth this year.
The benchmark 10-year Treasury was stable in Asia and yields sat just below 3% at 2.9805%.
The European Central Bank has said that the 50 basis point rate hike should not be blown away as European yields are also rising.
Commodities rallied with stocks this week as markets found reason to expect growth, but oil fell on Tuesday and showed signs of slowing on Wednesday.
Brent crude futures rose 0.7% to $ 112.73 a barrel and US crude futures rose 1.2% to $ 113.83 a barrel.
The S&P global rating has downgraded growth forecasts for China, the United States and the eurozone.
“The world economy is facing an unusually large number of negative shocks,” said Paul F. Gruenwald, chief economist.
“Two developments have changed the macro picture,” he said, referring to Russia’s aggression in Ukraine, which has sent commodity prices and inflation, higher, wider and more stable than previously thought.
(Edited by Sam Holmes and Kim Kogel)