Asian Markets Showing Signs of Recovery Under Presumptions of Halt in Rising interest rates

By: Asia Business Outlook Team | Thursday, 13 July 2023

Asian markets rose on July 13 on hopes that the Federal Reserve's long-running campaign of interest rate hikes was coming to an end, following data showing that US inflation rose less than expected in June.

Traders had a spring in their step this week as signs of the central bank's monetary tightening measures began to take effect, fueling speculation that this month's expected hike could be the last of an extended cycle.

The mood improved further on Wednesday, when the Labour Department reported that the US consumer price index was 3% in June, a more than two-year low and a sharp drop from 4% in May. The Fed's target rate is 2%.

Furthermore, the "core" rate, which excludes volatile food and energy components and is considered a better indicator of underlying inflation, fell to its lowest level since 2021.

On Wednesday, Wall Street reacted positively to the latest data, with the Nasdaq rising more than 1% as technology firms are more vulnerable to borrowing costs, while European markets also rose.

Asia happily took up the baton, with Hong Kong up more than 2% and Tokyo, Sydney, Seoul, Taipei, and Manila all up more than 1%.

The readings follow last week's better-than-expected personal consumption expenditures data, which fueled bets that the Fed will hike only once more in July before calling it quits.

Analysts also pointed out that while showing signs of softness, the economy remained in rude health and the labour market was still robust, suggesting that the recession many had feared earlier this year could be avoided.