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Most markets up on inflation hopes

A woman wearing a protective mask walks in front of an electronic stock board showing Japan’s Nikkei 225 index at a securities firm in Tokyo on Thursday, Jan. 12, 2023. AP PHOTO

HONG KONG: Most stock markets rose on Thursday, but profit-taking tempered optimism ahead of data that is expected to show inflation in the United States easing, giving the Federal Reserve (Fed) room to slow its interest rate hikes.

Wall Street's three main indexes provided a strong lead, with the S&P 500 and Nasdaq climbing more than 1 percent each, thanks to a rush back into beaten-down tech firms.

With optimism over China's reopening already fueling a rally across Asia, signs that the Fed's long-running monetary tightening campaign is finally paying off have provided investors with more reason to be happy.

The consumer price index (CPI) reading later on Thursday is the key event for investors this week, though analysts warned that an above-forecast reading would deal a hefty blow to confidence on trading floors.

“An in-line or softer-than-expected CPI [is] likely [to] result in a rally, whereas a hotter number could easily tip over the applecart,” Arthur Hogan of B. Riley Wealth said. “Good news for the economy can become good news for markets.”

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Asian traders started the day on a strong note, but selling pared the gains as the day wore on owing to profit-taking.

Hong Kong enjoyed another positive day, while there were also gains in Shanghai, Sydney, Seoul, Bangkok, Wellington, Manila and Jakarta.

Tokyo was flat, while Singapore, Taipei and Mumbai dipped.

London, Paris and Frankfurt joined the rally at the open.

Gains were also helped by comments from Fed official Susan Collins backing a quarter-point rate hike at the US central bank's next policy decision on February 1.

Collins, who heads the Boston Fed, told The New York Times that slowing the pace of increases would give policymakers a chance to see how their efforts to rein in decades-high inflation were working.

CMC Markets analyst Michael Hewson said: “In a way, it's not hard to understand why the markets believe a pivot might be coming, given how headline CPI has consistently fallen back from the peaks of 9.1 percent seen in June.”

“In November, we came in at 7.1 percent, which was well below expectations of 7.3 percent and a sharp fall from October's 7.7 percent, offering a boost to those who think that the Federal Reserve may not have to go as hard, or as far on rate hikes this year,” he added.

Investors are also keeping tabs on developments in China as it emerges from years of strict zero-Covid containment measures.

While the long-term outlook remains positive, soaring infections across the East Asian country are leading to worries about the effect on economic activity.

However, SPI Asset Management's Stephen Innes said: “Recent surveys suggest that the first wave has already peaked in China. And though spot economics remain poor, the market has discounted the near-term headwinds as hope springs eternal once the winter Covid waves pass.”

Building expectations for Chinese demand and a healthy 2023 continue to put upward pressure on oil prices, which jumped around 3 percent on Wednesday, with traders ignoring data showing a massive pickup in US inventories.

“Energy traders should get used to seeing oil prices head higher,” Oanda's Edward Moya said. “Oil demand is coming back and expectations are high that China's demand is about to skyrocket.”

Several crude experts have tipped the commodity to top $100 a barrel this year, with top hedge fund manager Pierre Andurand warning last week that it could pass $140.

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