Asia-Pacific stocks rise as Fed struggles to tackle high inflation

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Asia-Pacific stocks rose broadly as the yen fell on Tuesday after the chairman of the US Federal Reserve suggested it would act more aggressively to fight inflation.

Hong Kong’s Hang Seng Index rose 2.4%, Japan’s Topix climbed 1.4% and Australia’s S&P/ASX closed 0.9% higher, while in South Korea, the Kospi gained 1%.

In Japan, stocks were supported by a falling yen, which fell 0.8% against the dollar at 120.30 to its weakest level in more than six years.

In China, the CSI 300 index of the largest stocks listed in Shanghai and Shenzhen lost 0.5%.

The market rallied last week after Vice Premier Liu He made a rare intervention to underscore the government’s support for the economy and capital markets.

“I would expect more transparency and fewer surprises about future regulation, but also less actual regulation in the future – and, in general, policies that support growth and help the Chinese economy. achieve its target of a 5.5% growth rate,” said Kristina Hooper, chief global market strategist at U.S. fund manager Invesco.

European futures reported a mixed start, with FTSE 100 contracts flat and Euro Stoxx 50 futures down 0.4%.

The moves came after the 10-year Treasury yield hit 2.3%. The US government bond market is having its worst month since 2016 after rising inflation forced the Fed to raise interest rates last week.

Fed Chairman Jay Powell on Monday stressed the need for tighter monetary policy, after inflation hit a 40-year high of 7.9% last month.

He said the Fed needed to move “quickly” to tighter monetary policy to deal with an “extremely tight” labor market and “far too high” inflation.

US stocks also fell on Powell’s comments, but recouped most of their losses, with the S&P 500 index closing less than 0.1% for the day Monday.

“The yield spread on two-year and 10-year U.S. Treasuries has compressed significantly in recent months as the Fed has become more hawkish. If this yield spread turns negative, it could indicate that a recession is in the cards,” added Hooper.

On Tuesday afternoon in Asia, the 10-year yield was trading at 2.33%. S&P 500 futures fell 0.3%.

In commodity markets, the international crude oil benchmark Brent rose 3.1% to $119.22 a barrel. The invasion of Ukraine by Russia, the world’s second-largest oil supplier, sent global prices skyrocketing.

Gold was little changed at $1,936.89 an ounce.

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