Asian stocks rise, but investors cautious of rate hikes

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Asia stocks rose today, encouraged by a rally on Wall Street, but gains were kept in check by worries that aggressive central bank policy tightening will stifle global growth and raise the risks of stagflation.

The World Bank on Tuesday slashed its global growth forecast by nearly a third to 2.9% for 2022, warning that Russia's invasion of Ukraine has compounded the damage from the Covid-19 pandemic, and many countries now faced recession.MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9%, narrowing from morning gains but recouping most of its losses in the previous session, while Japan's Nikkei index was up 0.8%.

Australia's S&P index rose 0.37%, recovering part of its slide on Tuesday after the central bank unexpectedly raised interest rates by the most in 22 years and flagged more tightening to come. On Thursday, the European Central Bank meets and markets are expecting it to at least lay the groundwork for rapid rate rises, if not begin them with a small hike.

US Treasury Secretary Janet Yellen told senators on Tuesday that she expected inflation to remain high and the Biden administration would likely increase the 4.7% inflation forecast for this year in its budget proposal. Meanwhile shares in Hong Kong were supported by regulatory easing of Beijing, with tech companies advancing on policy relaxations. The Hang Seng Index recorded a 2% hike, with Hang Seng Tech Index rising 4%.

The US benchmark 10-year yield was 3.003%, having edged down from a four week high of 3.064% on Tuesday after Target warned about excess inventory and said it would cut prices, offering some relief to those who think inflation may be peaking.

 

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