Asian stocks surged Friday as investors looked to close the year on an optimistic note after US figures showed the Federal Reserve’s aggressive monetary policy easing inflationary pressures, even as concerns about COVID cases in China remain.
MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.71% and was set to close flat in December. The index will end the year with a 19% decline – its worst performance since 2008.
Japan’s Nikkei rose 0.22%, while Australia’s S&P/ASX 200 index rose 0.34%. Chinese stocks rose 0.63%, while Hong Kong’s Hang Seng Index rose 1.5%.
U.S. stocks closed sharply higher tonight, boosted by data on rising unemployment claims in the U.S., which suggested the Federal Reserve’s rate hikes are easing inflationary pressures.
Investors are concerned that central banks ‘ efforts to curb inflation could lead to an economic slowdown, while uncertainty over how quickly the Chinese economy will recover after the lifting of COVID controls has kept markets subdued.
Vishnu Varathan, head of Economics and strategy at Mizuho Bank, notes that there is a good chance that economies will not emerge unscathed from global policy tightening.
In 2023, inflation has yet to be curbed, and investors will also be wary of geopolitical tensions due to the Russian war in Ukraine and diplomatic tensions around Taiwan, analysts said.
The Chinese health system has been under pressure from the rising number of cases since the country began dismantling its “zero COVID”policy earlier this month, with several countries imposing or considering imposing restrictions on travellers from China.
The second largest economy in the world is expected to experience a slowdown in factory production and consumption in the short term due to workers and buyers becoming ill.
In the foreign exchange market, the US dollar was on its way to its best annual performance in seven years. The dollar index, which measures the greenback against six major currencies, was down 0.048% on Friday, but by the time it entered the last few trading hours of 2022, it had risen nearly 9% in value over the year.
Sterling was heading for its worst performance against the dollar since 2016, when the UK voted to leave the European Union. The pound was last traded at $1.2057, up 0.04% on the day, but it had fallen about 11% in value year-on-year. The Japanese yen rose 0.36% against the greenback on Friday at 132.53 per dollar. The euro fell 0.01% to $1,066.
U.S. crude rose 0.5% to $78.79 per barrel and Brent stood at $83.81, up 0.42% on the day. While far from peaks earlier this year, Brent would still close 2022 with a 5.76% gain after a 50.2% increase in 2021, while West Texas Intermediate (WTI) was on track for a 4.5% increase in 2022 after a 55% gain last year.
