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Saturday, December 10, 2022
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Asian shares higher on Fed slowdown signal, China stimulus

Asian shares

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8%, South Korean shares gained 0.6%, China’s bluechips increased 0.5%, Hang Seng index jumped 0.9% and Nikkei surged 1.3%

Asian shares tracked Wall Street higher on Thursday, buoyed by signals the U.S. Federal Reserve may slow the pace of interest rate hikes and news of fresh economic stimulus from China, with the dollar failing to recoup losses.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8% in early trade, boosted by a 0.6% gain in South Korean shares, a 0.5% increase in China’s bluechips and a 0.9% jump in Hong Kong’s Hang Seng index

Japan’s Nikkei surged 1.3%.

S&P 500 futures were up 0.2%, while Nasdaq futures rose 0.3%, after modest gains in U.S. stocks on Wednesday.

On Thursday, Bank of Korea slowed down the pace of tightening to a more modest 25 basis points, joining other central banks that have downshifted away from outsized hikes amid a looming global recession.

Minutes of the U.S. Federal Reserve’s last meeting also showed a “substantial majority” of Fed policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes.

In all, it is clear from the minutes that FOMC participants are determined to further raise the policy rate in the face of a very tight labour market and unacceptably high inflation, said analysts at Barclays.

However, the minutes also reveal an emerging divergence of views among members about the peak rate, and uncertainty about the peak rate, they said.

U.S. economic data on Wednesday showed jobless claims increased more than expected last week, while business activity contracted for a fifth month in November.

In Japan, data on Thursday showed manufacturing activity contracted at the fastest pace in two years in November.

Meanwhile, in China, COVID cases continued to surge, with the economic toll from mobility restrictions and lockdowns piling up.

China’s cabinet on Wednesday flagged the possibility of an upcoming cut to banks’ reserve requirement ratio (RRR), pledging new stimulus measures to revive its COVID-battered economy.

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