After a weak day on Wall Street, Asian markets rallied again to extend Monday’s strong start to the week
Asian stocks gained again Tuesday as worries about a US recession that sent markets into turmoil last week eased ahead of key inflation data.
Tokyo’s Nikkei returned from a long weekend to lead the rally and top the levels hit before last Monday’s rout, helped by a softer yen and a BoJ pledge not to raise interest rates further.
While the mood on trading floors has calmed since last week’s turmoil, investors remain wary following a big miss on US jobs creation fanned worries about the country’s economy, while geopolitical concerns also remain a drag on sentiment.
Trade was cautious ahead of the release of US consumer and wholesale price figures this week that could play a role in the Fed’s monetary policy decision-making.
Observers cautioned that the inflation numbers could cause big market moves in either direction, with a weaker-than-expected number adding to concerns about the economy, while a strong figure could dent rate cut bets.
The Federal Reserve is also walking a thin line between nurturing growth and trying to bring prices under control, with some saying recent soft data indicates officials have waited too long to cut.
One of the major risks is the timing and magnitude of the Fed’s rate cuts, according to ACY Securities’ Luca Santos.
If the Federal Reserve delays easing monetary policy, the US economy could risk entering a deeper slowdown, leading to a potential recession, Santos added.
Conversely, if the Fed reduces rates too aggressively, it might reignite inflationary pressures or create financial market instability. Balancing these risks will be crucial for maintaining economic stability, Santos said.
After a weak day on Wall Street, Asian markets rallied again to extend Monday’s strong start to the week.
Tokyo added more than 3% – breaking back above the August 2 closing price before last Monday’s slump – while Hong Kong, Sydney, Shanghai, Bangkok, Seoul, Taipei Singapore, Wellington, Manila and Jakarta also gained.
London, Paris and Frankfurt all opened higher.
