Asian markets saw a significant rise on Thursday, driven by the impressive performance of Wall Street, which reached its highest level in more than a year. The increase came after a report revealed that US consumer inflation had cooled more than expected in the previous month.
In afternoon trading, Japan’s benchmark Nikkei 225 index soared 1.5% to 32,425.69. Similarly, Hong Kong’s Hang Seng Index saw a notable rise of 2.6% to reach 19,357.96, while the Shanghai Composite Index gained 1.3% to settle at 3,236.86. These gains were seen even though China reported a decline in June trade figures.
According to customs data released on Thursday, Chinese exports saw a significant drop of 12.4% compared to the same period last year, as weakening demand followed central banks’ decision to raise interest rates in an effort to curb inflation. Import figures also fell 6.8%, while the trade surplus rose to $70.6 billion, down from $65.8 billion in May.
Commenting on China’s situation, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “China will probably recover at some point, but we are unlikely to see Chinese growth put severe pressure on commodity markets. That’s good news for inflation watchers.”
Elsewhere in the region, Australia’s S&P/ASX 200 index rose 1.7% to 7,253.50, and South Korea’s Kospi rose 0.8% to 2,595.51.
On Wall Street, the S&P 500 index on Wednesday rose 0.7% to close at 4,472.16, marking its highest level since April 2022. The Dow Jones Industrial Average also saw a modest 0.3% gain, hitting 34,347.43, while the Nasdaq composite rose 1.2% to settle at 13,918.96.
Most stocks posted gains, from notable big tech companies to stable utility companies. However, market gains eased slightly as the trading day progressed.
Wall Street has been grappling with high inflation, prompting the Federal Reserve to rapidly raise interest rates. Higher rates have a dampening effect on inflation, but they can also slow down the entire economy and negatively affect investment prices. As a result, the banking, manufacturing and other sectors have already suffered some damage.
Market traders remain confident that the Federal Reserve will raise the federal funds rate to a range of 5.25% to 5.50% during its next meeting in two weeks, which would mark its highest level since 2001. However, expectations are rising that this could be the final increase after rates started last year at near zero.
Following the release of colder inflation data, Treasury yields saw a drop in the bond market as traders adjusted their expectations for Federal Reserve action later this year. The 10-year Treasury yield fell to 3.86% from 3.98% late Tuesday, while the two-year Treasury yield fell to 4.73% from 4.89%.
Despite the pressure of higher rates, the resilience of the labor market has helped keep the economy afloat. The Federal Reserve’s latest “Beige Book” report indicated a slight increase in overall economic activity since late May. Some Federal Reserve districts have also reported slowing inflation.
In energy trading, benchmark U.S. crude oil rose a modest 19 cents to $75.94 a barrel, while Brent crude, the international standard, gained 25 cents to settle at $80.36 a barrel.
Currency trading witnessed a slight strengthening of the US dollar, which rose to 138.71 Japanese yen from 138.41 yen. Similarly, the euro saw a small rise to $1.1138 from $1.1128.
As markets continue to react to global economic events, investors are closely monitoring the latest trends and indicators to assess future market movements.
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