Asian stocks trade higher with investors awaiting US consumer price figures

Stocks in the Asia-Pacific region were trading higher on Wednesday after the Wall Street rally during the last session as investors looked ahead to the US Consumer Price Index which would set the Federal Reserve’s trajectory in its attempt to tackle inflation after raising rates seven times in 2022.

The biggest gainer was Hang Seng in Hong Kong, which was up 1.21 percent, or 247.67 points, while the Japan’s Nikkei 225 traded 1.01 percent higher and the Topix inched up 1.04 percent.  

Australia’s S&P/ASX 200 rose 0.93 percent as the country’s consumer price index rose 7.3 percent year-on-year in November, a sign that inflationary pressures have yet to slow.

The Kospi edged up fractionally even as South Korea’s unemployment rate for December rose to 3.3 percent compared to November’s 2.9 percent, marking the highest in 11 months. The Kosdaq climbed 1.50 percent.

However, Mainland China’s Shanghai Composite was directionless and mostly flat while the Shenzhen Component was down 0.35 percent.

Wall Street rally

Stocks advanced Tuesday as investors continued building on the New Year’s early rally while waiting for economic data and corporate earnings coming later in the week.

The Dow Jones Industrial Average gained 186.45 points, or 0.56 percent, to end at 33,704.10. The S&P 500 traded up 0.70 percent, to close at 3,919.25 points.

Meanwhile, the Nasdaq Composite led the major indexes for another day, adding 1.01 percent to end the session at 10,742.63. The average has rallied for the past three sessions as optimism over cooling inflation pushed investors to beaten-up technology stocks. It was the index’s first three-day win streak since November.

Investors came into 2023 worried that higher interest rates could tip the economy into a recession. However, many appear to be mounting bets that inflation is starting to ease. They will watch consumer price index data coming Thursday and big bank earnings on Friday for any clues into the health of the economy or signals of how the Fed will move interest rates going forward.

Barclays warns of oil going down

As Barclays cautioned about $15 to $25 per barrel downside risk, oil prices fell on Wednesday, erasing the previous session’s gains, after industry data showed an unexpected build in crude and fuel inventories in the United States.

The US is the world’s biggest oil user and enough supply coupled with stocks in the country means less fuel demand, thus reigniting the worries about the prospects.

Barclays’ warning comes against its current forecast of $98 per barrel, as it in a recent note linked downside risk to a possible continued slowdown in global manufacturing activity.

“Given the challenging macroeconomic backdrop (we) highlight $15-25/barrel of downside to our forecast if the slump in global manufacturing activity worsens similar to the 2008-09 episode,” Barclays said, adding that it “would imply 1-2 million barrels per day downside to our demand estimates.”

On Wednesday, US West Texas Intermediate (WTI) crude futures fell 59 cents, or 0.8 percent, to $74.53 a barrel at 0134 GMT, while Brent crude futures were down 62 cents, or 0.8 percent, at $79.48 a barrel.

US crude stocks jumped by 14.9 million barrels in the week ended Jan 6, sources said, citing data from the American Petroleum Institute (API). At the same time, distillate stocks, which include heating oil and jet fuel, rose by about 1.1m barrels.

Analysts had expected crude stocks to fall by 2.2 million barrels and distillate stocks to drop by 500,000 barrels.

World Bank cuts global growth rate

The forecast comes as the World Bank on Tuesday warned about slowdown in global growth rate and warned of another global recession in the latest Global Economic Prospects report.

Global growth is expected to slow “perilously close” to recession in 2023, the World Bank said, slashing its economic forecast on high inflation, rising interest rates and Russia’s invasion of Ukraine.

The World Bank’s latest forecast for the world points to a “sharp, long-lasting slowdown” with growth pegged at 1.7 percent, roughly half of the pace it predicted in June. This is among the weakest rates seen in nearly three decades, overshadowed only by the pandemic-induced recession of 2020 and global financial crisis in 2009.

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