Asian Stocks Up, but Investors Digest Chinese Data, Hawkish Powell Comments

This post was originally published on this site – Asia Pacific stocks were mostly up on Wednesday morning after U.S. Federal Reserve Chairman Jerome Powell signaled that monetary policy could be tightened quicker than expected.

China’s Shanghai Composite was up 0.04% by 9:14 PM ET (2:14 AM GMT) while the Shenzhen Component edged down 0.15%.

The Caixin manufacturing purchasing managers index (PMI) for November, released earlier in the day, was at 49.9. Data from the National Bureau of Statistics the day before showed that manufacturing PMI was at 50.1, while the non-manufacturing PMI was at 52.3.

The Caixin services PMI is due later in the week.

Hong Kong’s Hang Seng Index rose 1.21%.

Japan’s Nikkei 225 rose 0.72%, with capital spending growing 1.2% year-on-year in the third quarter and the manufacturing PMI for November was at 54.5.

South Korea’s KOSPI jumped 1.36%.

In Australia, the ASX 200 was down 0.38%, with the GDP contracting 1.9% quarter-on-quarter and growing 3.9% year-on-year in the third quarter of 2021. The Australian Industry Group manufacturing index for November was at 54.8.

Powell said the next Fed meeting should discuss whether to wrap up asset tapering a few months earlier, and did not use the word “transitory” to describe high inflation. This could also mean earlier-than-expected interest rate hikes.

The Fed chief’s U-turn on monetary policy comes as worries about current vaccines’ efficacy against the omicron COVID-19 variant continue to grow. Markets have recently been volatile as central banks begin withdrawing monetary policy support and omicron’s impact on the economic recovery remains unknown.

The gap between yields on 5-year and 30-year U.S. Treasuries shrunk during the U.S. session and remained near its narrowest since March 2020.

Although the yield-curve shift could indicate economic challenges ahead, some investors remained optimistic.

The flattening curve “doesn’t suggest imminent doom for the equity market in and of itself,” Charles Schwab (NYSE:SCHW) & Co. chief investment strategist Liz Ann Sonders told Bloomberg.

She added that “alarm bells go off in terms of recession” when the curve gets closer to inverting, and recommended also monitoring lower quality-corporate bond spreads for a gauge on sentiment

Investors now await U.S. data, with the Institute of Supply Management manufacturing PMI and the Fed Beige Book due later in the day. The U.S. job report, including non-farm payrolls, will follow on Friday.