Mixed Inflation Readings from US and China Impact Asian Stocks
Asian stocks experienced a range-bound movement on Friday as investors digested mixed inflation readings from the U.S. and China. The U.S. Consumer Price Index (CPI) showed that inflation grew slightly more than expected in December, dampening hopes of an early interest rate cut by the Federal Reserve. However, traders still maintained bets on a rate cut in March, which limited major losses in U.S. and Asian stock markets.
Japan’s Nikkei 225 Continues to Surge, Hits 34-Year High
Japan’s Nikkei 225 index emerged as the best performer in Asia this week, reaching a new 34-year high of nearly 35,500 points. The rally was driven by expectations of an ultra-dovish Bank of Japan and anticipation of further stimulus measures following a devastating earthquake. Despite signs of weakness in the Japanese economy, such as shrinking industrial production and soft retail sales, the Nikkei recorded a 6.2% jump this week, its best weekly gain since March 2022.
Chinese Stocks Rise as CPI Inflation Shows Mild Pick-up
Chinese stocks showed signs of recovery as the Shanghai Composite and CSI 300 indexes rose 0.4% and 0.5%, respectively. The increase in CPI inflation in China in December gave hope that consumer spending was on the path to recovery from the impact of COVID-19. The rise in inflation was mainly driven by higher holiday spending, especially in travel and shopping. However, the overall outlook for the Chinese economy remained weak, with Producer Price Index (PPI) inflation shrinking for the fifteenth consecutive month in December.
Broader Asian Markets Tread Water, Cautious of US Interest Rate Cuts
Broader Asian markets mirrored the overnight performance on Wall Street and remained cautious due to growing doubts over U.S. interest rate cuts. Most regional stocks were set for mild weekly losses as traders remained wary of risk-driven assets. The Australian and South Korean markets recorded slight losses of 0.1% and 0.2%, respectively.
Indian Stock Market Flat as Infosys Reports Weaker Profit
The Indian stock market was flat on Friday as the benchmark index, Nifty 50, was expected to open without any major changes. This followed a weaker profit report from Infosys Ltd, one of the index’s heavyweight stocks, for the December quarter. However, Infosys’ American Depository Receipts (ADRs) surged nearly 4% in overnight trade. Indian data due later in the day was also expected to influence market sentiment.
Analyst comment
1. Mixed Inflation Readings from US and China Impact Asian Stocks: Neutral news. Market will likely remain range-bound as investors digest the mixed inflation data and maintain bets on a rate cut in March, limiting major losses.
2. Japan’s Nikkei 225 Continues to Surge, Hits 34-Year High: Positive news. Market will likely continue to rally due to expectations of an ultra-dovish Bank of Japan and further stimulus measures, despite signs of weakness in the Japanese economy.
3. Chinese Stocks Rise as CPI Inflation Shows Mild Pick-up: Positive news. Market will likely show signs of recovery as consumer spending is on the path to recovery from COVID-19 impact, despite overall weak outlook for the Chinese economy.
4. Broader Asian Markets Tread Water, Cautious of US Interest Rate Cuts: Negative news. Market will likely remain cautious and show mild losses as traders become wary of risk-driven assets and doubt U.S. interest rate cuts.
5. Indian Stock Market Flat as Infosys Reports Weaker Profit: Neutral news. Market will likely open without major changes as investors react to the weaker profit report from Infosys and await further market data later in the day.
