TOKYO (AP) – Global shares gained yesterday as investors awaited a highly anticipated speech by the United States (US) Federal Reserve chair about interest rates at the end of the week.
Benchmarks rose in Europe in early trading after finishing higher in Japan, Australia, South Korea and China. Trading was temporarily delayed in Hong Kong by a storm.
Market watchers said share prices are likely to sway for some time, regardless of whether the focus is on controlling inflation or recession risks. In Asia, a wait-and-see mood has set in during recent sessions, as markets look for signs from the Fed.
“Market participants may want to see a more consistent recovery as a gauge of policy success before confidence is lifted,” said Yeap Jun-rong, market strategist at IG in Singapore.
France’s CAC 40 added 0.6 per cent in early trading to 6,424.17, while Germany’s DAX rose 0.7 per cent to 13,312.88. Britain’s FTSE 100 edged up 0.6 per cent to 7,519.01. US shares were set to drift higher with Dow futures gaining 0.6 per cent to 33,162.00. S&P 500 futures were up 0.8 per cent at 4,177.75.
Chinese shares have declined this week amid recent policy rate cuts by the People’s Bank of China, which also announced policies to stimulate the economy.
The Bank of Korea raised its key policy rate by 0.25 percentage points to 2.5 per cent in an effort to fight inflation, even as signs of inflationary pressures appeared to be gradually easing.
“Currently available information suggests that global economic downside risks have increased, affected by the prolonged Ukraine crisis and significant policy rate hikes in major advanced countries, while inflation has remained high,” the bank said in a statement.
A recent surge in prices of fresh food remains a risk, according to market analysts. The Bank of Korea said the nation’s gross domestic product – the total value of a nation’s products and services – is projected to grow by 2.6 per cent in 2022 and 2.1 per cent in 2023.
South Korea’s economy has recovered rapidly as consumption rebounded and COVID-19 restrictions were eased, but growth is likely to weaken as exports decline amid a global slowdown, the central bank said.
Japan’s benchmark Nikkei 225 edged up 0.6 per cent to finish at 28,479.01. Australia’s S&P/ASX 200 gained 0.7 per cent to 7,048.10. South Korea’s Kospi rose 1.2 per cent to 2,477.26. Hong Kong’s Hang Seng surged 3.6 per cent to 19,968.38, after trading was delayed earlier because of a storm. The Shanghai Composite rose 1.0 per cent to 3,246.25.
Stocks have been driven higher through the summer on hopes that inflation was near its peak and that the US Federal Reserve may hike interest rates less aggressively than earlier feared.
But recent comments by Fed officials have cooled such expectations, sending Wall Street on Monday to its worst day in months. Discouraging reports on the economy have meanwhile highlighted the risk of a recession.
Wall Street’s focus remains centered yesterday, when Fed Chair Jerome Powell gives a speech at an annual economic conference in Jackson Hole, Wyoming.
It’s been the setting for market-moving speeches in the past, which has investors hoping Powell will offer clarity on further rate hikes.
Higher interest rates slow the economy in hopes of undercutting inflation. But they also risk choking off the economy if done too aggressively, and they pull down prices on all kinds of investments.