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Asian shares mostly rise on interest rate, inflation hopes

TOKYO (AP) – Asian shares were mostly higher yesterday after new data showed inflation in the United States (US), while still at a 40-year high, was not as bad as some analysts expected.

Benchmarks rose in Japan, South Korea, Hong Kong and Australia. US futures were also higher, while oil prices were little changed.

Shares fell in Shanghai after the Chinese government reported that exports rose nearly 16 per cent in March from a year earlier while imports were flat.

The easing of a COVID-19 lockdown in Shanghai was another encouraging factor. Shanghai released 6,000 more people from the central facilities where they were under medical observation to guard against the coronavirus, the government said yesterday, though the lockdown of most of China’s largest city was being maintained in its third week.

“The good news is that China will begin to come out of lockdowns at some point, and there will be an injection of stimulus of some form by the authorities to reboot communities and the economy. The light at the end of the tunnel is reasonably bright for China,” ACY Securities Chief Economist Clifford Bennett said in a commentary.

But Bennett added, “Do not expect a return to rampant growth, however.”

Japan’s benchmark Nikkei 225 jumped 1.9 per cent to finish at 26,843.49. Australia’s S&P/AS 200 added 0.3 per cent to 7,479.00. South Korea’s Kospi surged 1.9 per cent to 2,716.60. Hong Kong’s Hang Seng gained 0.3 per cent to 21,382.96, while the Shanghai Composite shed 0.6 per cent to 3,194.92.

People walk by an electronic stock board of a securities firm in Tokyo. PHOTO: AP

In Tokyo trading, shares of Shionogi dropped 11 per cent after the Japanese pharmaceutical company reported that animal tests for its experimental oral drug to treat COVID-19 showed it may be a risk for foetal development. Japanese media reported the drug won’t be prescribed to pregnant people or those who may be pregnant.

Stocks ended slightly lower on Wall Street on Tuesday after investors weighed the inflation data for March, although overall it remained at its highest level in 40 years. Some analysts
urged caution.

”The fact remains that pricing pressures are still elevated at their highest level in 40 years and the near-term outlook for an aggressive tightening of policies to cool demand stays unaltered,” market strategist at IG in Singapore Yeap Jun Rong said.

The S&P 500 fell 0.3 per cent after having been up 1.3 per cent earlier in the day. The pullback extends the benchmark index’s losing streak to a third day, reflecting investors’ worries about the potential economic collateral damage as the Federal Reserve tackles high inflation more aggressively.

The Dow Jones Industrial Average and the Nasdaq composite each fell 0.3 per cent after shedding early gains.

The indexes initially rallied following the release of the report, which showed inflation last month was again at its highest level in generations, driven by soaring gasoline prices in particular. Still, the reading was relatively close to economists’ expectations.

The measure known as “core inflation”, which excludes highly volatile costs of food and fuel, moderated to its slowest month-on-month change since September.

In energy trading, benchmark US crude added 10 cents to USD100.70 a barrel. It climbed 6.7 per cent to settle at USD100.60 on Tuesday, keeping the pressure on inflation. Brent crude, the international standard, rose 25 cents to USD104.89.

Consumer prices rose 8.5 per cent in March from a year earlier, accelerating from February’s 7.9 per cent inflation rate and the highest since 1981. To bring it under control, the Fed revealed in the minutes from its latest meeting that it’s prepared to hike short-term rates by half a percentage point, double the usual amount, at some upcoming meetings, something it hasn’t done since 2000.

The worry is the Federal Reserve may be so aggressive about hiking interest rates that it forces the economy into a recession. Higher interest rates can discourage all kinds of investments.

More swings may be in store for stocks as companies prepare to report their earnings for the first three months of the year. Delta Air Lines, JPMorgan Chase and other big-name companies will kick off the reporting season yesterday.

In currency trading, the US dollar edged up to JPY126.03 from JPY125.37. The euro cost USD1.0835, up from USD1.0827.