Asian equities jump on Wall Street rally

Powell remarks boost Wall Street, Asia follows

The soothing words of Jerome Powell overnight unleashed anxiously waiting, but side-lined buyers, resulting in a strong overnight recovery by Wall Street. Mr Powell noted that the Fed could hike rates to rein in inflation, planned to start the balance sheet run-off sooner rather than later, but also said inflationary pressures would peak mid-year. What he didn’t say was also important. He didn’t back four rate hikes in 2022, nor a March start to hikes, nor did he give any details on when the Fed balance sheet run-off would start. It was an outstanding performance really, leaving the bowls neither too full nor too shallow; but just right from the financial market’s perspective.

The S&P 500 rallied 0.92%, the Nasdaq leapt higher by 1.41%, and the Dow Jones rose 0.52%. In Asia, futures on all three have held steady.

Asian markets have coat-tailed the New York rally and moved higher today. Notably, those that have struggled as the Nasdaq fell over the past few seasons. The Nikkei 225 has jumped 1.75% higher in response, with the South Korean Kospi rallying 1.15%, and Hong Kong also leaping 1.75% higher.

Mainland China’s Shanghai Composite has drifted 0.15% higher, with the more growth-centric CSI 300 climbing by 0.45%. Singapore and Taipei have drifted 0.15% higher, while Jakarta has gained 0.45%, and Kuala Lumpur and Manila are unchanged. Australia’s ASX 200 and All Ordinaries have added 0.45% today.

The broader rally has favoured more value-centric markets with a heavier correlation to the Nasdaq today. As such, I am not expecting fireworks from Europe when it opens, having enjoyed a good season with the US overnight. The US inflation data will be the next hurdle for the equity rally continuance. Above 7.0% likely brings the inflation trade back, limiting gains, while a sub 6.50% headline should keep the party going as Fed hiking timetables get reset back to mid-year.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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