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Asian Stocks Up as Bets on Aggressive Fed Interest Rate Hike Recede

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By Zhang Mengying

Investing.com – Asia Pacific stocks were mostly up on Monday morning as investors’ expectations of aggressive interest rate hikes from the U.S. Federal Reserve receded.

The Japanese market is closed for a holiday.

South Korea’sKOSPI gained 1.46% by 10:51 PM ET (2:51 AM GMT).

In Australia, the ASX 200 jumped 0.56%.

Hong Kong’s Hang Seng Index was up 1.49%.

China’s Shanghai Composite was up 1.07% while the Shenzhen Component was down 0.52%. Rising COVID-19 cases, lockdowns, and woes in property-sector remain headwinds for China’s economic recovery.

Central bank Governor Yi Gang said the monetary authority will step up the implementation of prudent monetary policy.

The equities were also boosted by data showing that U.S. core retail sales rose 1% month-on-month in June.

The dollar dropped from a record high as bets on aggressive Federal Reserve interest-rate hikes receded. Investors continued to assess the impact of red-hot inflation and the potential for a U.S. recession. At the same time, equity valuations are becoming cheaper.

“This softening of inflation expectations is one reason why we expect the FOMC will not accelerate the near-term hiking pace and will deliver a 75bp hike at the July FOMC meeting,” Goldman Sachs (NYSE:GS) analysts said in a note.

While stocks are pricing in a recession, there are signs that “this is a market that wants to start bottom fishing,” Lori Calvasina, head of US equity strategy at RBC Capital Markets, said on Bloomberg Television. “People are starting to look for things that have been de-risked,” she said, adding U.S. small-caps are often cited as an example.

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