Asian Stocks Up, but Persistent Inflation and China Data Concerns Remain

Asian Stocks Up, but Persistent Inflation and China Data Concerns Remain

(Investing.com) Asia Pacific stocks were mostly up on Tuesday morning, with investors remaining cautious about whether central banks can hike interest rates to curb inflation without impacting economic growth. Oil gained after the European Union (EU) backed a push to ban some Russian oil.

China’s Shanghai Composite was up 0.35% by 10:47 PM ET (2:47 AM GMT) while the Shenzhen Component inched down 0.02%. Data released earlier in the day showed that May 2022’s manufacturing purchasing managers’ index (PMI) was 49.6, while the non-manufacturing PMI was 47.8.

Hong Kong’s Hang Seng Index was up 0.37%.

Japan’s Nikkei 225 225 fell inched up 0.07%, with data showing that the jobs/application ratio was 1.23, the unemployment rate was 2.5%, industrial production fell 1.3% month-on-month and retail sales grew 2.9% year-on-year in April 2022.

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South Korea’s KOSPI edged up 0.11% and in Australia, the ASX 200 was down 0.41%.

U.S. contracts were up, but markets were closed on Monday for a holiday. Crude oil was near the $118 mark after the EU agreed on the ban on Russian oil in response to the invasion of Ukraine on Feb. 24.

Rising energy and food costs continue to keep upward pressure on prices globally. European bonds fell after German inflation hit a record high.

Although global shares are set to end the month with modest gains, volatility, and skepticism about whether the market is near a trough, remain. Fears that tighter central bank monetary policies could trigger a recession, stubbornly high inflation and uncertainty around how China will boost its flailing economy also remain.

“The mood is temporarily better in markets,” AXA Investment Managers chief investment officer for core investments Chris Iggo said in a note.

“I think the worst is over for bond markets but picking the bottom in equities is trickier and another 10%-15% drop in equity markets cannot be ruled out," the note added.

High inflation numbers from Germany and Spain added urgency to the European Central Bank (ECB)’s exit from crisis-era stimulus. This comes ten days before a crucial meeting where the ECB is set to announce the conclusion of large-scale asset purchases and confirm plans to hike interest rates in July 2022, the first hikes in more than a decade.

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Across the Atlantic, Fed Governor Christopher Waller said he wants to keep hiking interest rates in half-percentage point steps until inflation eases back toward the central bank’s goal. New York Fed President John Williams and St. Louis Fed President James Bullard will speak at separate events Wednesday. Cleveland Fed President Loretta Mester will discuss the economic outlook a day later.

The Federal Reserve is set to start shrinking its $8.9 trillion balance sheet, and release its Beige Book, on Wednesday. U.S. President Joe Biden will also hold a rare meeting with Fed Chairman Jerome Powell later in the day. The U.S. jobs report, including non-farm payrolls, is also due on Friday.

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