Asian markets mostly rose, tracking gains on Wall Street

Stocks rose on Friday in Asia after news that consumer inflation slowed in the US last month sent Wall Street indexes higher.

Tokyo’s Nikkei 225 fell 1.3% to 26119.52 amid speculation the Bank of Japan may soften and tighten its ultra-loose monetary policy as the yield on 10-year Japanese government bonds has been pushed beyond the central bank’s 0.5% ceiling with the sell-off ahead. From next week’s policy-setting meeting.

The Bank of Japan kept its key interest rate at minus 0.1%, maintaining that downward pressure from a possible recession was a bigger risk than inflation, which remained at relatively moderate levels in Japan.

Shares in Fast Retailing, which jumped earlier in the week on news that it would raise wages by up to 40%, fell 6.4% after the company reported weaker-than-expected earnings in the previous quarter.

China reported that its trade surplus swelled to a record $877.6 billion in 2022 as exports rose 7% despite weak US and European demand and anti-virus controls that temporarily shut down Shanghai and other industrial hubs. The country’s politically sensitive trade surplus expanded 29.7% from the 2021 record, already the highest surplus ever for any economy.

Hong Kong’s Hang Seng rose 0.5% to 21,621.96 and the Shanghai Composite rose 0.5% to 3,180.27. Seoul’s Kospi Index rose 0.4% to 2388.58, while Australia’s S&P/ASX 200 jumped 0.7% to 7328.10.

Taiwan’s benchmark rose 0.6% while Bangkok’s SET was down 0.7%.

On Thursday, the S&P 500 rose 0.3%, to 3,983.17. The Dow Jones Industrial Average rose 0.6%, to 34,189.97. The Nasdaq advanced 0.6%, to 11001.10

Small cap stocks have outpaced the broader market. The Russell 2000 Index rose 1.7% to 1,876.06. Every major index is on track for weekly gains.

A report showing inflation slowed in December revived hopes that the Federal Reserve might ease the economy, using smaller interest rate hikes to cool prices. Such increases can stifle inflation, but they do so by slowing the economy and risk causing a recession. It also hurts investment prices.

Analysts warned investors not to get carried away. There is still pressure on the economy due to higher rates and there may still be more large volatility ahead.

Inflation has been declining for six consecutive months. Although it slowed to 6.5% last month from its peak of over 9% in June, this is still high. The Fed has been adamant that it plans to continue raising interest rates this year and that it does not see any rate cuts until 2024 at the earliest.

Some areas of the economy remain strong, threatening continued pressure on inflation. The most important of which is the labor market. Thursday’s report showed fewer workers filed for unemployment benefits last week. This is an indication that layoffs remain low even though some big tech companies have made high-profile announcements about job cuts.

A strong job market is of course good for workers, especially when their increases fail to keep pace with inflation. But the Fed contends that wage gains could prompt companies to raise prices to cover their higher costs and only exacerbate inflation, even though workers’ wage gains slowed in December.

Earnings reporting season is set to begin on Friday in earnest, with JPMorgan Chase and UnitedHealth Group among the day’s headlines. One of the big concerns on Wall Street is that soaring inflation and a slowing global economy are eating away at the profits of big companies.

Analysts say this may be the first time since 2020 that earnings per share for S&P 500 companies have fallen below year-ago levels.

In other trading on Friday, US benchmark crude oil lost 18 cents to $78.21 a barrel in electronic trading on the New York Mercantile Exchange. It rose 98 cents to $78.39 a barrel on Thursday.

Brent crude, the basis for pricing international trade, lost 31 cents to $83.72 a barrel.

The dollar fell to 129.16 yen from 129.24 yen. The euro fell to $1.0838 from $1.0849.

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