Asian stock markets rose on Thursday after a recovery on Wall Street, but investors remained cautious about the ongoing impact of skyrocketing inflation and the war in Ukraine.
Prices were already soaring in major economies when Russia’s invasion of Ukraine sent shockwaves through the global energy, food and commodity markets.
Despite lingering concerns about the US Federal Reserve’s next moves to contain prices, Wall Street enjoyed a buoyant session – especially the tech-rich Nasdaq, which surged 2.0 per cent. Asia was in a similar mood on Thursday as Tokyo closed 1.2 per cent higher. Hong Kong and Shanghai were also in positive territory. Sydney rose 0.6 per cent as Australia posted its lowest unemployment rate – a smidge under four per cent – in 48 years. Seoul was flat, meanwhile, as South Korea’s central bank raised its key interest rate to the highest level since August 2019 to tame rising inflation.
Analysts had warned overnight that the uncertainty was far from over. “With a thicker fog of war starting to roll in and engulf the global markets again, it is another worrying setup amid the widespread bearish sentiment out there,” Stephen Innes of SPI Asset Management said in a note.
‘Countervailing forces’
Data this week from the United States – the world’s biggest economy – and Britain showed inflation at levels not seen in decades.
The grim outlook was reflected in the latest earnings report from JP Morgan Chase, the largest American bank by assets. “There’s this very strong underlying economy,” its chief executive Jamie Dimon said. But he pointed to “countervailing forces”, including rising interest rates, inflation and the war in Ukraine. “And those things are going to collide at one point, probably sometime next year,” he said in a conference call with reporters. “I’m not predicting a recession... But is it possible? Absolutely.”
Rising interest rates, inflation and the war in Ukraine are going to collide at one point, probably sometime next year. I’m not predicting a recession... But is it possible? Absolutely.- JP Morgan Chase chief executive Jamie Dimon
Analysts said, however, that markets had welcomed an indication that US inflation may be approaching its peak. Eyes are also on the European Central Bank as its policymakers meet on Thursday, with the outlook for the eurozone economy still murky.
Both main oil contracts stayed above the $100 per barrel mark, with fears swirling about global supply constraints over the invasion of Ukraine by Russia – a major producer of oil and gas. “The oil complex is heavily fixated on the short-term,” Vandana Hari of Singapore-based Vanda Insights told Bloomberg News. “The prospect of an EU ban on Russian oil will keep the market on edge as long as Ukraine festers.”