Hong Kong-Equity markets rallied and the dollar dipped further Friday after fresh data showing continued slowing of inflation fanned hopes the Federal Reserve is nearing the end of its long-running campaign of interest rate hikes. The surprise on-month drop in producer prices in March -- and the biggest since April 2020 -- came a day after the consumer price index dropped more than expected, suggesting the central bank’s tightening campaign was finally paying off.
A higher-than-forecast reading on jobless claims added to the positive mood, which helped send Wall Street’s three main indexes rallying, including a two percent advance for the Nasdaq. Investors are now betting the Fed will hike rates 25 basis points at its May gathering but possibly hold after that, with some still clinging to hopes it will even cut by the end of the year. In a sign of cooling inflation elsewhere, Singapore’s central bank stood pat on rates, having hiked five times in a row. The move follows similar decisions in Australia, India, Canada and South Korea. This week’s data has reassured investors that inflation is coming down and that the economy could be heading for a soft landing, even though minutes from the Fed’s March policy meeting revealed some officials see a mild recession by the year’s end.
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“Coming fast on the heels of yesterday’s better-than-expected (consumer prices) reading, today’s (producer price index) print, plus the in-line jobless claims report, reinforces the view that the labour market continues to rebalance and that the post-pandemic inflation scare is ending,” said SPI Asset Management’s Stephen Innes.
“And as we move into the seventh-inning stretch, where arguably much could happen between now and the final pitch, the combination of progress on inflation and the softer labour market has been encouraging. “It reinforces the view that the Fed may be in the 9th inning of the hiking cycle, which markets seem to be endorsing today as yields on 10-year Treasuries declined.” Oil prices rose in Asian business, extending a rally sparked by major producers’ decision this month to slash output by more than a million barrels a day. The OPEC+ group said Thursday the move had put world markets on course to be in deficit, which will widen as the year goes on, with China’s reopening adding extra pressure.
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The Nation, 15 Apr, 2023