South Korea Financial Markets
A currency trader walks by the screens showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between U.S. dollar and South Korean won at a foreign exchange dealing room in Seoul, South Korea, Friday, June 24, 2022. Shares were higher in Asia on Friday, tracking gains on Wall Street, where the market is headed for its first weekly gain after three weeks of punishing losses. (AP Photo/Lee Jin-man)
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Asian shares gain as investors shrug off downbeat data

3 Comments
By ELAINE KURTENBACH

Shares were higher in Asia on Friday, despite data suggesting economies are slowing. The advance tracked gains on Wall Street, where the market is headed for its first weekly gain after three weeks of punishing losses.

Tokyo's Nikkei 225 index added 1.2% to 26,491.97 and the Kospi in Seoul jumped 2.4% to 2,369.16. Hong Kong's Hang Seng advanced 2% to 21,707.92 and the Shanghai Composite index added 1% to 3,354.63.

In Australia, the S&P/ASX 200 gained 0.8% to 6,577.40. Shares also rose in India and Taiwan.

U.S. and European futures also were higher.

Market players are looking ahead to U.S. inflation data due next week. They appeared to shrug off preliminary data showing a slowing of factory activity in several countries including Japan.

The manufacturing manager surveys of “several developed economies came in lower-than-expected in both the manufacturing and services sector, which points to a broad-based moderation in economic activities," Jun Rong Yeap of IG said in a commentary.

A report Friday showed inflation in Japan remained at 2.1% in May, pushed higher by energy costs and a weaker currency. However, underlying core inflation, which excludes volatile costs for energy and fresh foods, remained at 0.8% and the central bank is unlikely to follow the example of the U.S. Federal Reserve and other central banks in raising interest rates, analysts said.

The Bank of Japan “isn’t convinced that this will be sustainable because wage growth remains soft and higher energy costs are weighing on corporate profits and consumer sentiment," Marcel Thieliant of Capital Economics said in a report.

On Wall Street, trading was wobbly as investors focused on another round of testimony before Congress by Federal Reserve Chair Jerome Powell. He told a House committee the Fed hopes to rein in the worst inflation in four decades without knocking the economy into a recession, but acknowledged “that path has gotten more and more challenging.”

The S&P 500 ended 1% higher at 3,795.73 after having been down as much as 0.4%. The Dow Jones Industrial Average rose 0.6% to 30,677.36 and the Nasdaq gained 1.6% to 11,232.19.

Smaller company stocks also gained ground. The Russell 2000 rose 1.3% to 1,711.67.

Trading has been turbulent in recent weeks as investors try to determine whether a recession is looming. The benchmark S&P 500 is currently in a bear market. That means it has dropped more than 20% from its most recent high, which was in January. The index has fallen for 10 of the last 11 weeks.

On Thursday, Powell stressed: “I don’t think that a recession is inevitable.” He has said it's ”certainly a possibility" and that the central bank is facing a more challenging task amid the war in Ukraine essentially pushing oil and other commodity prices even higher and making inflation even more pervasive.

Powell spoke to Congress a week after the Fed raised its benchmark interest rate by three quarters of a percentage point, its biggest hike in nearly three decades. Fed policymakers also forecast a more accelerated pace of rate hikes this year and next than they had predicted three months ago, with its key rate to reach 3.8% by the end of 2023. That would be its highest level in 15 years.

The Labor Department reported Thursday that fewer Americans applied for jobless benefits last week, though it was slightly more than economists expected. The solid job market is a relatively bright point in an otherwise weakening economy, with consumer sentiment and retail sales showing increasing damage from inflation.

As higher prices stretch pocketbooks, consumers are shifting spending from big ticket items like electronics to necessities. The pressure has been worsened by record-high gasoline prices that show no sign of abating.

Big technology and health care companies did much of the heavy lifting. Microsoft rose 2.3% and Johnson & Johnson rose 2.2%.

Energy stocks fell as the price of U.S. crude oil dropped 1.8%. Valero fell 7.6%.

Early Friday, U.S. benchmark crude oil was up 36 cents at $104.63 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the basis for pricing for international trading, shed 9 cents to $106.55 per barrel.

Bond yields fell significantly. The yield on the 10-year Treasury note, which helps set mortgage rates, fell to 3.09% from 3.15% late Wednesday.

The U.S. dollar fell to 134.73 Japanese yen from 134.94 yen. The euro rose to $1.0539 from $1.0524.

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Market players . . . appeared to shrug off preliminary data showing a slowing of factory activity in several countries including Japan. The manufacturing manager surveys of “several developed economies came in lower-than-expected in both the manufacturing and services sector, which points to a broad-based moderation in economic activities," Jun Rong Yeap of IG said in a commentary.

There is a little bit more to this. Than that.

The au Jibun Bank Japan Manufacturing PMI declined to 52.7 in May 2022 from a final 53.3 a month earlier, according to a flash reading announced Thursday, the lowest figure in four months, signaling the joint-softest operating conditions since last September. Output rose at the slowest rate in the current four-month sequence of growth, and buying levels eased, while new orders contracted for the first time in nine months. Delivery times lengthened further, due to persistent material shortages and pressure on supply chains, thus contributing to the strongest increase in output prices in the survey history.

Good news? Some. Employment growth accelerated, with backlogs of works accumulating at a slower rate; and input price inflation eased. Sentiment remained positive.

Services? Better. The au Jibun Bank Japan's flash reading from yesterday showed the Services PMI climbed to 54.2 in June of 2022 from a final 52.6 in May, the third straight month of expansion in services activity and the strongest pace since October 2013. New business rose at a moderate pace for the second straight month as demand conditions were bolstered by a resumption of activity in the tourism sector. On inflation, businesses recorded a fresh series record increase in input prices, contributing to an accelerated rise in output prices, which were up at the strongest rate since October 2019. Confidence strengthened further.

The yen is trading a minute ago at 134,780, -0.05% for the day, and -0.12% for the week. The ten year benchmark bond rate yield was 0.2270, up 0.008 for the day, but away away from the 0.25% implicit yield cap. BOJ this week left its key short-term interest rate unchanged at -0.1% and that for ten year bond yields around 0%.

U.S. news? The current account deficit in the US widened to a record high of $291.4 billion in Q1 2022, from an upwardly revised $224.8 billion in the previous period, above market expectations of $273.5 billion, mostly due to a surge in imports of goods (an increase by $71.1 billion to a record US$829.7 billion), with the biggest gains in consumer goods, industrial supplies and materials, and capital goods.

Also from the U.S.: The S&P Global US Composite PMI fell to a five-month low of 51.2 in June 2022, from 53.6 previously, according to preliminary estimates released yesterday. The S&P Global Flash US Manufacturing PMI fell to 52.4 in June 2022 from 57 in May, well below market expectations of 56 and pointing to the slowest growth in factory activity for almost two years as contractions in output and new orders weighed. Production and new sales declined for the first since the depths of the pandemic in mid-2020. Goods producers registered the lowest degree of confidence in the outlook for output over the coming year for 20 months in June.

Also from yesterday, the S&P Global US Services PMI fell to 51.6 in June of 2022 from 53.4 in May, the lowest in five months and well below forecasts of 53.5, according to preliminary estimates. Primary downward pressure came from a sharp fall in new orders, with demand falling for the first time since July 2020, while new export orders decreased at the fastest pace since December 2020. On top of that, the rate of job creation eased to the softest in four months. Sentiment remained positive but was at its lowest since September 2020

In the U.S., all eyes are on the Michigan consumer sentiment. Last time, Consumers' assessments of their personal financial situation worsened about 20%, and 46% of U.S. consumers attributed their overall negative views to inflation, the biggest share since 1981, during the Great Recession.

U.S. durable goods orders MoM are due Monday, while the Japanese consumer confidence index is due out Tuesday.

Stay tuned.

0 ( +0 / -0 )

US is destroying itself with each interest hike. The amount of damage it will do to the common people is unimaginable the more interest it raised. How anyone is ever gonna repay their loans and mortgages is beyond me.

With the pandemic, people desperate need more cash flow to survive but with higher cost of living and raising interest rate from banks, most average citizens won't even be able to pay rent soon. No wonder there is so much chaos there.

-2 ( +0 / -2 )

is destroying itself with each interest hike. 

You think the high inflation is harmless?

It’s recession now or bigger recession later, take the medicine.

1 ( +1 / -0 )

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