Asian markets got off to a strong start on Monday, trailing a surge on Wall Street fueled by hopes that US data will allow the Fed to slow the pace of rate hikes.
All three major New York indices surged above 2% on Friday. It said closely monitored reports showed higher-than-expected new job growth, but wage growth slowed.
This came as another figure showed a shocking contraction in a key service sector. This is the first time since spring 2020, the height of the pandemic.
The reading was caught by traders hoping the Fed would start easing its monetary tightening campaign while suggesting the world’s top economy is showing signs of weakness.
Investors now expect the authorities to raise borrowing costs by about 25 basis points at their next meeting at the end of the month.
But policymakers have warned that interest rates will continue to rise as they seek to curb decades-high inflation, with some speculating that a rate cut is unlikely until 2024.
In a further sign of hope, Friday’s data showed eurozone inflation slowing to 9.2% for the second month in a row in December.
Asian stocks got off to a head start on the day, with Hong Kong gaining more than 2% and Shanghai also rising.
Traders in the two cities are in top form earlier this year as they welcome China’s Covid-free emergence and promise to help the struggling economy, especially the real estate sector.
Borders between Hong Kong, Macau and China partially opened on Sunday, giving the city a much-needed boost.Macau-based casinos surged with the move.
“China’s shift in COVID-19 policy is critical for growth and stock returns,” said Steven Innes of SPI Asset Management.
“Thus, with the lifting of border restrictions between China/Hong Kong/Macau and the resumption of international travel, local travelers are not only festive, but also investors.”
Sydney, Seoul, Singapore, Taipei, Manila and Jakarta also got off to a strong start.
Easing expectations for US interest rates have also weighed on the dollar, prolonging Friday’s decline against major currencies.
Oil prices, which plunged about 8% last week, rose on demand concerns sparked by a spike in Covid infections in China as containment measures were lifted.
But while commodities are currently at more than a year low, observers say they could rise again as China reopens and the global economy recovers.
“Once Asia fully reopens, I think oil will be above $140 a barrel,” said hedge fund manager Pierre Andurand. “The market is underestimating the size of the increased demand it will bring,” he added.
Hong Kong – Hang Seng Index: 21,470.96, up 2.3%
Shanghai – Overall: +0.6% to 3,177.85
Tokyo – Nikkei 225: Closed for public holidays
USD/JPY: fell to 131.71 from 132.13 on Friday
EUR/USD: Rising from $1.0647 to $1.0669
GBP/USD: Rise from $1.2095 to $1.2118
EUR/GBP: rose from 88.01p to 88.04p
West Texas Intermediate: up 0.9% to $74.40 a barrel
North Sea Brent crude: up 0.9% at $79.29 a barrel
New York – Dow: up 2.1% at 33,630.61 (close)
London – FTSE 100: up 0.9% at 7,699.49 (close)
— Bloomberg News contributed to this article —