Asian Stocks Up, but Inflation and China's COVID Outbreaks Remain Concerning

This post was originally published on this site – Asia Pacific stocks were mostly up on Tuesday morning, even as investors continue to evaluate the economic outlook thanks to elevated food and fuel costs, central banks’ tightening monetary policies, and China’s COVID-19 lockdowns.

Japan’s Nikkei 225 gained 0.44% by 10:08 PM ET (2:08 AM GMT) and South Korea’s KOSPI rose 0.74%.

In Australia, the ASX 200 was up 0.29% and Hong Kong’s Hang Seng Index jumped 1.85%.

China’s Shanghai Composite edged down 0.17% while the Shenzhen Component was up 0.32%. Shanghai reportedly hit a milestone of three days of zero community transmission, which could see the city ease out of its grueling lockdown.

U.S. and European futures were back on an upward trend, even as Wall Street shares ended their session lower, and Treasury yields edged up. In cryptocurrencies, bitcoin was near the $30,000 mark as the stablecoin sector experiences volatility.

Commodity costs also continue to climb, with oil around the $114 mark and an index of agricultural prices hitting a record high.

Meanwhile, Monday’s U.S. data showed New York Empire State manufacturing activity index contracted for the second time in three months to -11.6 in May 2022. Investors also continue digesting the impact of China’s COVID-19 lockdowns on its economic activity data released on Monday.

Investors now await the eurozone and U.K. consumer price indexes, due on Wednesday, and China’s loan prime rates, due on Friday.

The disappointing data from both the U.S. and China are driving fears of a global economic recession as inflation shows no sign of cooling down. This has forced the U.S. Federal Reserve and other central banks to tighten their monetary policies.

“With inflation showing little sign of letting up, the Fed is under pressure to accelerate the pace of tightening,” Morgan Stanley (NYSE:MS) Wealth Management chief investment officer Lisa Shalett said in a note.

Taken together with the impact of the war in Ukraine, perpetrated by Russia’s invasion on Feb. 24, and China’s COVID-19 outbreak, this “suggests global growth may be decelerating more quickly than forecast,” the note added.

However, New York Fed President John Williams downplayed deteriorating liquidity conditions in financial markets. He said on Monday that this was to be expected, given rising volatility as investors deal with uncertainty over global events and shifting U.S. monetary policy.

Fed Chairman Jerome Powell and other Fed policymakers will speak later in the day, with Philadelphia Fed President Patrick Harker following a day later.

In Asia Pacific, the Reserve Bank of Australia released the minutes from its latest policy meeting earlier in the day. G-7 finance ministers and central bankers are also due to meet on Wednesday.

Meanwhile, Twitter Inc . (NYSE:TWTR). shares fell on Monday, after Tesla Inc Tesla Inc. CEO Elon Musk fanned speculation that he could seek to renegotiate his takeover of the social networking platform. A viable deal at a lower price would not be “out of the question,” according to Musk.