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Asian Stocks Up, Bets Grow on More Hawkish Fed Tightening

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By Zhang Mengying

Investing.com – Asia Pacific stocks were mostly up on Thursday morning although red-hot U.S. inflation data hardened bets on more aggressive U.S. Federal Reserve monetary policy tightening.

Japan’s Nikkei 225 jumped 0.83% by 8:45 PM ET (1:45 AM GMT).

South Korea’s KOSPI edged down 0.18%.

In Australia, the ASX 200 gained 0.31%.

Hong Kong’s Hang Seng Index was down 0.18%.

China’s Shanghai Composite was up 0.12% while the Shenzhen Component was up 0.66%.

U.S. Consumer Price Index (CPI) rose to 9.1% in June year-on-year, a four-decade high. Investing.com predicted a reading of 8.8% while 8.6% was recorded in May. Investors speculated whether the 9.1% reading marks the peak.

Markets expected a historic one percentage-point Fed interest-rate hike later this month. Fed Bank of Atlanta President Raphael Bostic said “everything is in play” to combat price pressures.

Fed Bank of Cleveland President Loretta Mester told Bloomberg that the CPI report was uniformly bad and that the central bank will need to go well beyond the neutral level of rates.

Treasury two-year yields, sensitive to imminent Fed moves, climbed further.

“Stubbornly high inflation increases the risk that the FOMC continues to hike aggressively and triggers a recession,” Commonwealth Bank of Australia (OTC:CMWAY) senior economist Kristina Clifton said in a note. That’s increasingly the market’s base case and recession fears will continue to support the dollar, she added.

In Asia Pacific, Singapore’s central bank unexpectedly tightened monetary policy on Thursday, sending the currency higher.

Meanwhile, a Chinese central bank official said liquidity in the interbank market is more than “reasonably ample,” a sign that further rate cuts are unlikely.

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