Asia shares up as sentiments boosted by Fed minutes, US jobs

TOKYO: Asian shares are mostly higher following a rally on Wall Street as investors assessed minutes from the Federal Reserve’s latest meeting of policymakers and welcomed encouraging data on US jobs.

Worries over China’s economic slowdown were weighing on regional sentiment.

Japan's benchmark Nikkei 225 rose 0.4 per cent to finish at 25,820.80. Australia's S&P/ASX 200 edged up nearly 0.1 per cent to 7,063.60. South Korea's Kospi added 0.6 per cent to 2,269.71. Hong Kong's Hang Seng jumped 1.3 per cent 21,055.60, while the Shanghai Composite gained 1.1 per cent to 3,156.44.

“Despite the positive close in Wall Street, the fade of earlier gains and muted moves in the US equity futures this morning are driving more measured upside in the Asia session,” Yeap Jun Rong, a market analyst at IG, said in a report.

Widespread COVID-19 cases in China have added to gloom over a long-term slump in its property sector and over the impact of pandemic restrictions that were only recently loosened as the virus gained ground in the worst nationwide outbreak so far.

“Retail sales in general should be weaker in December compared to the prior month,” said Robert Carnell, regional head of research Asia-Pacific at ING. He said demand might bounce back during the Chinese New Year later in the month.

“After the long holiday, there could be even more daily COVID-19 cases, and then another quiet month for retail. The road to recovery may not be smooth for retailers,” he said.

The government will release its weekly unemployment report on Thursday (Jan 5) and its closely watched monthly employment report, for December, on Friday. Strong job numbers are seen as an indication of inflationary pressures that support further interest rate increases by the Federal Reserve.

But layoffs have been mounting in the technology sector, which is dealing with falling demand as inflation squeezes consumers.

On Wall Street, major indexes rallied following a government report showing that job openings increased more than expected in November. Stocks then shed some of their gains after the minutes from the Fed meeting last month underscored how the central bank remains determined to keep rates high to crush inflation.

The S&P 500 rose 0.8 per cent to 3,852.97, with more than 80 per cent of shares notching gains. The Dow Jones Industrial Average rose 0.4 per cent to 33,269.77, and the Nasdaq composite added 0.7 per cent to 10,458.76. Small company stocks outpaced the broader market, lifting the Russell 2000 index 1.2 per cent to 1,772.54.

Banks, companies that rely on consumer spending and communications stocks accounted for a big share of the rally. Citigroup rose 2.6 per cent, Starbucks added 3.6 per cent and Netflix gained 4.9 per cent.

The Fed raised its key short-term interest rate last month for the seventh time in 2022 and signaled more hikes to come. The increase was smaller than those from the previous four meetings, reflecting signs that inflation, while still high, has been easing.

The minutes from the mid-December meeting show Fed officials remained determined to keep rates high, taking little comfort from inflation’s decline from a peak of 9.1 per centin June to 7.1 per centin November.

The Fed's benchmark lending rate stands at a range of 4.25 per centto 4.5%, up from close to zero following seven increases last year. It has forecast that the rate will reach a range of 5 per centto 5.25 per centby the end of 2023 and it isn’t calling for a rate cut before 2024.

In energy trading, benchmark US crude rose US$1.09 to US$73.93 a barrel in electronic trading on the New York Mercantile Exchange. It dropped US$4.09 on Wednesday. Brent crude, the international pricing standard, rose US$1.11 to US$78.95 a barrel. US crude oil settled 5.3 per centlower on Wall Street.

In currency trading, the US dollar fell to 132.42 Japanese yen from 132.56 yen. The euro cost US$1.0617, up slightly from US$1.0610.