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Lower US Inflation Reduces Rate Worries, Lifting Stocks In Asia

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Following a larger-than-expected decline in U.S. inflation on Friday, the stock markets in Asia rose amid expectations that the Federal Reserve could postpone further interest rate increases.

Asia’s Market benchmark in Hong Kong increased by 5.4%. Sydney and Seoul both gained almost 3%. Tokyo and Shanghai also made progress. Oil costs grew somewhat.

Following the government’s announcement that consumer prices jumped 7.7% over a year ago in October, Wall Street’s benchmark S&P 500 index soared 5.5% on Thursday, marking its highest day in two and a half years. It was the fourth month of fall and less than the 8% that economists had predicted.

In a report, Yeap Jun Rong of IG stated that the announcement “drove a more dovish” calibration of interest rate expectations.

In order to reduce inflation, which is reaching multi-decade highs, the Fed and central banks in Europe and Asia are boosting interest rates. Investors are concerned that they could cause a global recession. They are hoping that lower inflation will cause the Fed to scale back its intentions for further rises.
Forecasters cautioned on Thursday that it was still too early to say for sure that prices were in check. According to Fed officials, rates may need to remain high for some time.
Indexes from Asia fared well. The Nikkei 225 in Tokyo increased by 2.7% to 28,186.34, while the Hang Seng index in Hong Kong climbed to 16,948.96.
After the Communist Party in power pledged to change quarantine and other anti-virus measures to cut the cost of China’s draconian “zero-COVID” approach, which has caused economic disruption, the Shanghai Composite Index increased 1.2% to 3,073.36.

The S&P-ASX 200 in Sydney increased by 2.4% to 7,128.40, while the Kospi in Seoul increased by 2.8% to 2,471.10. Bangkok lost ground while New Zealand, Singapore, and Jakarta advanced.

The S&P increased to 3,956.37 on Wall Street thanks to significant advances by IT giants. Apple increased 8.9%, Microsoft increased 8.2%, and Amazon increased 12.2%.

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To reach 33,715.37, the Dow Jones Industrial Average increased by 3.7%, or more than 1,200 points.

The tech-heavy Nasdaq composite experienced its greatest day since March 2020, when Wall Street was recovering from a meltdown at the beginning of the coronavirus epidemic, rising 7.4% to 11,114.15.

Despite economists’ warnings that the Fed’s effort to slow price increases was far from complete, investors were comforted by the fact that U.S. inflation was dropping from its peak of 9.1% in June. After four rises of 0.75 percentage points, quadruple its average margin, traders anticipate the Fed to increase its benchmark lending rate in December, albeit by a lower margin of half a percent. This benchmark has increased from around zero in March to a range of 3.75% to 4%.

In an effort to lessen the pressure on prices to rise, the Fed is seeking to restrict economic growth.

The most recent numbers show the Fed is “on the right road,” but over the next quarters, it will have to deal with “a lot of factors,” according to a report by Edward Moya of Oanda. Inflation might reach as high as 5.50%, he added, and the benchmark rate could be increased to 5%.

Core inflation, which excludes volatile food and energy costs and is more carefully monitored by the Fed, was 6.3% compared to a year ago, down from 6.6% in September and under the consensus estimate of 6.5%. Half of September’s 0.6% improvement in core prices, or 0.3%, was seen in October.

Mortgage and other loan rates are influenced by the yield on the 10-year Treasury, which decreased to 3.82% from 4.15%. The two-year rate, which more closely tracks forecasts for Fed action, dropped from 4.62% to 4.32%, on track to experience its biggest decline since 2008.

On the New York Mercantile Exchange’s computerized trading platform, benchmark U.S. crude increased by 29 cents to $86.76 a barrel in the energy sector. On Thursday, the contract increased 64 cents to $86.47. The benchmark price for global oil trading, Brent crude, increased 27 cents to $93.94 per barrel in London.

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The dollar increased from 141.83 yen on Thursday to 142.08 yen today. The euro increased slightly from $1.0180 to $1.0186.

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