Asian markets soar on easing inflation, Central banks optimism

July 03, 2023 (MLN): Data showing inflation easing further boosted Asian markets Monday, fueled by hopes that central banks could be nearing the end of their interest rate hiking cycle, as APP reported.

All three main indexes on Wall Street rallied Friday with Apple ending above the $3 trillion capitalization mark for the first time, on the report, setting up a positive start to the week for Asian investors.

News that the personal consumption expenditures (PCE) index the Federal Reserve's favored gauge had dropped sharply provided some relief for traders after a series of forecast-beating indicators suggested the economy remained in good health.

A strong read on economic growth and a fall in jobless claims had fanned expectations that the Fed would have to continue hiking borrowing costs to control prices.

The PCE figure came along with news that Eurozone inflation had also eased, thanks to a drop in energy costs.

The S&P 500 and Nasdaq recorded significant gains to end a strong first half of the year, even after a series of rate hikes as well as a regional banking crisis.

Tech firms were among the best performers, with Apple becoming the first company to reach a market capitalization above $3tr at Friday's close.

The strong performance extended to Asian markets, where tech also saw significant gains.

Hong Kong and Seoul rose more than 1%, while Shanghai, Sydney, Taipei, Manila, and Jakarta were also in positive territory.

Tokyo also experienced a significant increase as the Bank of Japan's closely watched Tankan survey of confidence among the country's largest manufacturers rose for the first time in seven quarters.

owever, analysts cautioned that while the PCE figure was welcomed on trading floors, Fed officials would not likely be swayed by one reading, and the bank is expected to resume hiking this month after pausing in June.

"Whilst the data is seemingly moving in the right direction (lower inflation), it is too soon for the Fed to declare victory," said Rodrigo Catril from National Australia Bank.

This week will see the release of US job creation data as well as a visit to China by US Treasury Secretary Janet Yellen.

The Treasury Department stated that she is expected to discuss the importance of responsible management of the relationship and addressing global challenges.

This trip comes just weeks after Secretary of State Antony Blinken's meeting with China's top leader, President Xi Jinping, and Foreign Minister Qin Gang in Beijing in June.

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