Hong Kong and mainland benchmarks rose. The Hang Seng traded at the highest level since July in a repeat of Wednesday’s session as Alibaba Group Holding led the index for the second day, signalling fresh appetite for Chinese tech stocks. Shares in South Korea, Japan and Australia fluctuated. Contracts for the Euro Stoxx 50 and S&P 500 benchmarks fell.
Federal Reserve minutes from its December meeting showed many officials highlighted the need to curb inflation without slowing the economy too much, heartening some investors. Meanwhile, traders are returning to Chinese equities amid a growing conviction that the relaxation of virus curbs will eventually fuel a revival in consumption and spending.
“Optimism on reopening and supportive policy can continue to drive the market for now, along with investors’ fear of missing out, but at some point it will have to take a pause for re-evaluation,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “It’s always hard to call an end to momentum-driven rallies.”
The yen advanced against its G10 peers, rebounding after a 1.2% decline versus the dollar on Wednesday. Benchmark Treasuries gave up some of the prior day’s gains, while sovereign debt in Australia and New Zealand rallied.
The price of crude rose after falling 9.5% in two days, including the biggest daily decline since September on Wednesday. China’s complicated reopening is one factor that drove the drop. The price of gold increased after touching the highest level since June on Wednesday.
A private services index for China showed that activities contracted at a slower pace in December. It was at 48 last month, compared to 46.7 in November.
Data released on Wednesday in the US showed improving supply chain conditions, declining input prices and slower demand – all developments the Fed would welcome. But job openings data pointed to a robust labour market, which rattled investors. The nonfarm payrolls report on Friday will provide a clearer picture of the labour market.
“The Fed wanted to send a message to the market that they would not be easing or cutting rates anytime in 2023,” said Joe Gilbert, portfolio manager for Integrity Asset Management. “However, we must remember that the Fed also did not forecast raising rates by 400 basis points twelve months ago, so their forecasting ability of their own actions is sometimes quizzical.” BM/DM