Stocks in Asia-Pacific markets edged higher on Monday, with the tech sector being the biggest gainer, as investors awaited additional signs of possible easing in US inflation.
Taiwan’s tech-heavy weighted index was the top performer, trading 1.54% higher, while the MSCI’s broadest index of Asia-Pacific shares outside Japan soared 0.70%, and Australia’s S&P/ASX 200 rose 1.02%.
The US dollar falling further from a 20-year peak also helped improve risk sentiment, although it did little to boost trading volume in the Chinese and Hong Kong markets, which were closed for a holiday.
South Korean stock markets were also closed for a holiday.
Japan’s Nikkei 225 index added 1.16%, while the country’s travel sector shares climbed on news that the government plans to call off tourist visa requirements from certain countries to loosen its COVID-19 border measures further.
The Philippines’ PSEi index posted the most gains in Southeast Asia, surging 1.66%.
Regional stocks saw positive signals from US stocks’ strong session on Friday when the major indices ended three consecutive weeks of registering losses. Tech shares, which have been weakened by higher US interest rates this year, became the best performers.
Upcoming US Inflation Data In Focus
Investors are now turning their attention to the upcoming release of the crucial US inflation data for August on Tuesday.
The country’s consumer price index (CPI) is expected to decline further from the 40-year high reached earlier in 2022.
Seeing US inflation withdrawing further may help maintain the rally in stock markets, provided that it would suggest that the Federal Reserve’s aggressive rate hikes this year have been effective so far as planned.
Lower inflation will eventually prompt the US central bank to slow down on increasing interest rates. However, the Fed plans to keep raising rates sharply in the near term. Fed Chairman Jerome Powell stated last week that interest rate increases would continue until inflation reaches its 2% target.
Markets are betting more than a 90% chance of a 75-basis point hike from the central bank when it holds its policy meeting next week.
Higher interest rates have weighed heavily on Asian stocks this year as they reduce the division separating high-risk and low-risk investment returns. Tech sector shares were the most affected by the selling.
Still, lower consumer prices in the world’s largest economy may eventually help weaken prospects of higher interest rates, which can strongly support stock markets.
