Asian stocks follow Wall St higher as inflation fears ease

Beijing: Asian stock markets followed Wall Street higher Tuesday as inflation fears eased and investors regained an appetite for risk.

Market benchmarks in Shanghai, Tokyo, Hong Kong and Seoul advanced.

Overnight, Wall Street’s benchmark S&P 500 index rose 1 per cent, recovering about half of last week’s losses. Gains were led by tech stocks.

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Investors worry a global economic recovery might be hampered if rising inflation prompts governments and central banks to withdraw stimulus. But a Federal Reserve official helped to allay some of those fears when he said Tuesday the U.S. central bank shouldn’t look at changing policy in the midst of the coronavirus pandemic.

U.S. markets delivered a positive start for the week, as easing inflation concerns drive a bounce in tech, said Yeap Jun Rong of IG in a report.

The Shanghai Composite Index rose 1.6 per cent to 3,553.12 while the Nikkei 225 in Tokyo gained 0.6 per cent to 28,534.27. The Hang Seng in Hong Kong advanced 1.2 per cent to 28,764.21.

The Kospi in Seoul was 0.8 per cent higher at 3,168.07 and the S&-ASX 200 in Sydney added 0.7 per cent to 7,092.30. New Zealand declined while Southeast Asian markets advanced.

Stocks fell after hitting a record high May 7 amid growing concern higher inflation as economies revive would disrupt commerce or prompt governments to roll back stimulus spending and easy credit.

On Monday, the president of the St. Louis Federal Reserve Bank, James Bullard, told Yahoo Finance more inflation was not really a surprise and it wasn’t time to rethink monetary policy.

Fed officials said earlier the U.S. economy would be allowed to run hot, with inflation above the central bank’s 2 per cent target, to ensure a recovery is established.

I think there will come a time when we can talk more about changing the parameters of monetary policy,” Bullard said. I don’t think we should do it when we’re still in the pandemic.

The S&P 500 rose to 4,197.05. The index is now on track for a 0.4 per cent monthly gain as the latest quarterly profit-reporting season nears an end.

The Dow Jones Industrial Average added 0.5 per cent to 34,393.98. The tech-heavy Nasdaq Composite gained 1.4 per cent to 13,661.17.

Nvidia rose 4.1 per cent, while Micron Technology added 2.7 per cent. Among communication stocks, Facebook gained 2.7 per cent and Twitter jumped 4.8 per cent.

Companies that rely on direct consumer spending made solid gains, while sectors that are viewed as safe havens such as utilities lagged.

Bond yields, or the difference between the market price and the payout at maturity, fell as prices rose. That often is taken as a sign investors are less concerned about inflation, which can erode the value of that payout.

On Friday, the Commerce Department releases one of its inflation gauges, the personal consumption and expenditures index, or Core PCE. The Fed prefers that tool to measure inflation, instead of the consumer price index released earlier in the month.

Economists surveyed by FactSet expect Core PCE to be up 3 per cent from a year ago, which would be above the Fed target.

In energy markets, benchmark U.S. crude gained 11 cents to USD 66.16 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose USD 2.47 to USD 66.05 on Monday. Brent crude, the price basis for international oils, gained 20 cents to USD 68.57 per barrel in London. It added USD 2.02 the previous session to USD 68.46.

The dollar declined to 108.72 yen from Monday’s 108.79 yen. The euro rose to USD 1.2230 from USD 1.2213.

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