Asian stocks mostly rise on interest rates and inflationary hopes

TOKYO (AP) – Asian stocks were mostly higher on Wednesday after new data showed that U.S. inflation, while still at a 40-year high, was not as bad as some analysts had expected.

Benchmarks rose in Japan, South Korea, Hong Kong and Australia. US futures were also higher, while oil prices were little changed.

Stocks fell in Shanghai after the Chinese government reported exports rose nearly 16% year-on-year in March while imports were flat.

The easing of a COVID-19 lockdown in Shanghai was another encouraging factor. Shanghai released 6,000 more people from the central facilities where they were under medical observation to protect themselves from the coronavirus, the government said on Wednesday, despite the lockdown of most of China’s biggest cities being maintained for the third week.

“The good news is that China will eventually start to come out of lockdowns and there will be some form of stimulus from the authorities to restart communities and the economy. The light at the end of the tunnel is reasonably bright for China,” said Clifford Bennett, chief economist at ACY Securities, in a comment.

But Bennett added, “Don’t expect a return to unbridled growth, however.”

Japan’s benchmark Nikkei 225 rose 1.9% to close at 26,843.49. Australia’s S&P/AS 200 rose 0.3% to 7,479.00. South Korea’s Kospi rose 1.9% to 2,716.60. Hong Kong’s Hang Seng rose 0.3% to 21,382.96, while the Shanghai Composite slipped 0.6% to 3,194.92.

Shionogi shares fell 11% in Tokyo trading after the Japanese pharmaceutical company reported animal testing of its experimental oral drug to treat COVID-19 showed it could pose a risk to fetal development. Japanese media reported that the drug is not prescribed to pregnant women or those who may be pregnant.

Stocks on Wall Street ended slightly lower on Tuesday after investors weighed inflation data for March, though overall they remained at their highest levels in 40 years. Some analysts urged caution.

“The fact remains that price pressures are still at their highest levels in 40 years and the near-term prospects for aggressively tightening policy to cool demand remain unchanged,” said Yeap Jun Rong, market strategist at IG Singapore.

The S&P 500 fell 0.3% after rising 1.3% earlier in the day. The pullback extends the benchmark index’s losing streak into a third day, reflecting investor concerns about the potential economic collateral damage as the US Federal Reserve becomes more aggressive in fighting high inflation.

The Dow Jones Industrial Average and Nasdaq Composite each fell 0.3% after shedding early gains.

Indexes initially rallied following the release of the report, which showed that inflation last month was again at its highest level in generations, largely due to rising gasoline prices. Nevertheless, the value was relatively close to what economists had expected.

The metric known as “core inflation,” which excludes wildly volatile food and fuel costs, eased to its slowest monthly change since September.

In energy trading, benchmark US crude was up 10 cents at $100.70 a barrel. It rose 6.7% to trade at $100.60 on Tuesday, keeping pressure on inflation. Brent crude, the international standard, rose 25 cents to $104.89.

Consumer prices rose 8.5% yoy in March, accelerating from February’s inflation rate of 7.9%, the highest since 1981. To bring it under control, the Fed announced in the minutes of its last meeting that it is willing to raise short-term interest rates by half a percentage point, twice the usual amount, at some forthcoming meetings, something it has not done since 2000.

The concern is that the Federal Reserve could raise interest rates so aggressively that it will force the economy into recession. Higher interest rates can discourage all types of investments.

More swings could be in store for stocks as companies prepare to announce earnings for the first three months of the year. Delta Air Lines, JPMorgan Chase and other well-known companies start their earnings season on Wednesday.

In forex trading, the US dollar rose to 126.03 Japanese yen from 125.37 yen. The euro cost $1.0835, up from $1.0827.

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