ASIA MARKETS: Shares, Currencies Rise On China Reopening, Investors Await Fed Cues

Tuesday,   17-May-2022   09:41 AM (IST)

Asian shares and currencies advanced on optimism over China’s reopening, while traders await the U.S. Federal Reserve outlook on likely pace of monetary policy tightening and retail sales data. Shares climbed 2.1% in Hong Kong, led by Chinese technology companies. China’s gauge added 0.9% and South Korea’s index advanced 0.6%. Japanese and Australian equities inched 0.2% higher while the FTSE Bursa Malaysia Index up 0.4% 1,550.26. Petronas Chemicals Group and plantation companies were the top performers on the KLCI. The onshore Chinese yuan rose 0.2% to 6.7860, the Korean won climbed 0.7% and the Malaysian ringgit inched higher to 4.3920 to the dollar. The dollar index slipped to 104.10, extending the recent pullback. Optimism over further easing of the lockdown in Shanghai and bargain buying boosted Asian shares and helped U.S. equity futures inch higher. The authorities said yesterday that most of Shanghai’s districts had halted the community spread of the coronavirus and the city has reported three days of no community transmission. Still, the outlook for the Asian and other economies remains challenging and uncertain amid high oil prices and inflation. Brent crude today reached above $115 a barrel, the highest level since March, as trades price in better demand from China. Inflation, meanwhile, in most economies is above target levels, prompting central banks to raise interest rates. The U.S. Federal Reserve is expected to raise rates at a much faster pace than other central banks as it struggles to quell inflation that is running at four times the 2% medium-term target. After raising rate by 75 basis points over the last two meeting, the Fed is expected to lift rates by another 200 basis points this year. Fed Chair Jerome Powell’s comments later today alongside a slew of other policymakers will be scrutinized to gauge whether the current pricing of the rate hike cycle is appropriate. Powell has emphasized that controlling inflation is currently the top priority and that the steps Fed takes to rein in prices pressures could cause some economic pain. The U.S. retail sales data due today will help in assessing how inflation and the Fed’s policy tightening is impacting consumer spending.