Nikkei and Hang Seng Advance But Inflation Fears Persist

Asia’s major equity markets advanced on Monday despite lingering concerns about rising prices across the globe.

While optimism about the global economic recovery remains intact, the rise in prices at rates not seen for decades has traders increasingly worried that central banks will have to tighten monetary policy quicker and more sharply than previously thought.

And data out of the United States last week showing consumer sentiment at a 10-year low indicated that the issue is being felt in people’s pockets, putting pressure on the Federal Reserve to step in.

However, for now officials are sticking to their view that the inflation spike will be temporary and peter out as supply chain problems are resolved.

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Wall Street remains optimistic and its three main indexes ended last week on a strong note, paring steep losses suffered on Tuesday and Wednesday in reaction to forecast-beating US inflation.

Tokyo enjoyed a strong showing after data showing the economy contracted more than forecast in the third quarter raised hopes the government will unveil a huge stimulus programme to stoke a recovery.

The Hang Seng Index rose 0.25%, or 62.94 points, to 25,390.91. The Shanghai Composite Index slipped 0.16%, or 5.80 points, to 3,533.30, while the Shenzhen Composite Index on China’s second exchange eased 0.19%, or 4.77 points, to 2,462.39.

Hong Kong, Sydney, Seoul, Wellington, Singapore, Mumbai, Bangkok and Taipei were also higher but Shanghai, Manila and Jakarta edged down.

The benchmark Nikkei 225 index gained 0.56%, or 166.83 points, to 29,776.80, while the broader Topix index added 0.39%, or 7.92 points, to 2,048.52.

There was little initial reaction to data showing Chinese retail sales grew far more than expected in October, with traders concerned about a slowdown in economic growth owing to lockdowns put in place to battle fresh virus outbreaks.

Biden-Xi Talks

The weakness is giving the country’s central bank a headache as it must try to nurture a recovery while at the same time keeping a lid on inflation, which is sitting at levels not seen since the mid-1990s.

Meanwhile, traders will be keeping tabs on a virtual meeting between Biden and his Chinese counterpart Xi Jinping that is planned for Monday evening, US time.

The virtual meeting of the presidents comes against a backdrop of rising tensions over several issues including Taiwan, trade, human rights and Hong Kong.

Trading on a new Chinese stock exchange focused on small and medium companies began in Beijing, with investors able to buy and sell more than 80 firms.

Chinese media reported that a number of new stocks on the exchange rose more than 30%, while 10 triggered temporary suspensions when they surged more than 60%.

The new bourse follows the 2019 launch of a Nasdaq-style board focused on science and technology listings on the Shanghai Stock Exchange.

MARKETS

Tokyo > Nikkei 225: UP 0.6% at 29,776.80 (close)

Hong Kong > Hang Seng Index: UP 0.3% at 25,390.91 (close)

Shanghai > Composite: DOWN 0.2% at 3,533.30 (close)

New York > Dow: UP 0.5% to 36,100.31 (close)