HONG KONG- Asian shares edged higher on Wednesday from close to two-year lows hit in the previous session and the dollar held steady, ahead of keenly awaited US inflation data that will offer a guide to how aggressively the US Fed will raise rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.45 percent, trading marginally above its lowest level since July 2020 touched the day before. Japan’s Nikkei gained 0.3 percent.
Chinese blue chips led the gains, rising 1.5 percent after producer prices in the world’s second largest economy rose at the slowest pace in a year in April, leaving room for more stimulus to shore up an economy facing pressure from COVID-19 restrictions.
Strict curbs to combat the coronavirus have weighed on China’s economy. As of Tuesday, 41 Chinese cities are currently implementing full or partial lockdowns or some kind of district-based control measures, estimates by Nomura analysts showed.
They estimated around 289.8 million people are currently affected by these lockdown measures in regions that account for around 33.8 trillion yuan ($5.02 trillion) of China’s total GDP, down moderately from last week’s 327.9 million people and 35.4 trillion yuan.
But the main scheduled event for the day is the US inflation data, due at 12.30 GMT, which will give an indication of whether the US Federal Reserve will raise rates even more aggressively to combat inflation.
The Fed last week raised its target for overnight bank-to-bank lending by a half a percentage point, and Chair Jerome Powell said two more such rate hikes are likely at the US central bank’s coming policy meetings.
There has also been speculation in markets they the Fed will need to go in for a massive 75 basis point hike at one meeting.
This has sent US Treasury yields higher, and supported the dollar. — Reuters
