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Asian shares rose again on Tuesday as fears of a U.S. recession, which sent markets into a tailspin last week, eased ahead of key inflation data, while oil prices held gains on concerns about a wider war in the Middle East.
Tokyo’s Nikkei led gains after a long weekend, boosted by a weaker yen and the Bank of Japan’s pledge not to raise interest rates, breaking through levels seen before last Monday’s plunge – its worst since 1987.
While the mood on trading floors has calmed since last week’s turmoil, investors remained cautious as a sharp drop in U.S. jobs stoked concerns about the world’s top economy, while geopolitical worries also remained a drag on sentiment.
The cautious trade picture comes ahead of this week’s release of U.S. consumer and wholesale price data that could have an impact on the Federal Reserve’s monetary policy decisions.
Observers warned that inflation data could cause sharp market swings, with weaker-than-expected inflation data fueling concerns about the economy while strong inflation data could undermine bets on rate cuts.
The Fed also walks a delicate line between promoting economic growth and controlling prices, and some say recent weak data suggest officials have waited too long to cut interest rates.
“One of the main risks is the timing and magnitude of the Fed’s rate cuts,” said Luca Santos of ACY Securities.
“If the Fed delays easing monetary policy, the U.S. economy could face the risk of a deeper slowdown, possibly leading to a recession.
“Conversely, if the Fed cuts rates too much, it could reignite inflationary pressures or cause financial market instability. Balancing these risks is critical to maintaining economic stability.”
Asian stocks rose again after a dull day on Wall Street, extending a strong start to Monday.
Tokyo stocks rose more than 3%, surpassing the closing price on August 2 before the plunge last Monday, while stock markets in Hong Kong, Sydney, Shanghai, Bangkok, Seoul, Taipei, Singapore, Wellington, Manila and Jakarta also rose.
London stocks turned positive after data showed that Britain’s unemployment rate unexpectedly fell in the second quarter and wage growth slowed to its lowest level in nearly two years.
Stock markets also rose in Paris and Frankfurt.
Oil prices edged lower over the past week but still maintained their upward momentum amid concerns about a possible escalation of conflict in the Middle East and rising tensions with major producer Russia.
The White House warned Monday that Iran and its proxies could launch a “series of large-scale attacks” against Israel as early as this week following the assassinations of top Hezbollah and Hamas leaders in late July.
– Key data around 08:10 GMT –
Tokyo – Nikkei 225: Up 3.5% to 36,232.51 (close)
Hong Kong – Hang Seng Index: Up 0.4% to 17,174.06 (close)
Shanghai Composite Index: Up 0.3% to 2,867.95 points (close)
London – FTSE 100: Up 0.2% at 8,225.07
EUR/USD: Up to $1.0933 from $1.0931 on Monday
GBP/USD: Up to $1.2807 from $1.2766
USD/JPY: Up from 147.26 to 147.84
EUR/GBP: Down to 85.34 pence from 85.61 pence
West Texas Intermediate crude: Down 0.5% to $79.66 a barrel
Brent North Sea crude: Down 0.5% to $81.87 a barrel
New York – Dow Jones: Down 0.4% to 39,357.01 (close)
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