Asia stocks rise as Powell touts disinflation, Nikkei hit by weak earnings

By Ambar Warrick

Investing.com -- Most Asian stock markets rose on Wednesday after Federal Reserve Chair Jerome Powell struck a less hawkish tone than feared during a recent speech, while Japan’s Nikkei lagged on a slew of weak earnings.

Technology-heavy bourses tracked overnight gains on Wall Street, with South Korea’s KOSPI, the Taiwan Weighted index, and Hong Kong’s Hang Seng up between 0.4% and 1.3%.

In a widely awaited speech on Tuesday, Powell reiterated that the U.S. was experiencing disinflation after a slew of sharp interest rate hikes through 2022. But he also warned that strength in the jobs market and stubborn inflation could spur more interest rate hikes this year.

Still, markets took his speech as a signal that the Fed’s rate hike cycle will eventually ease this year. The dollar retreated overnight, as did U.S. Treasury yields.

But Japan’s Nikkei 225 index lagged its peers on Wednesday, losing 0.4% after disappointing results from Nintendo Co Ltd (TYO:7974), Softbank Group Corp (TYO:9984), and Sharp Corp (TYO:6753). The three stocks tumbled between 5.9% and 11.2% after logging surprise declines in their quarterly earnings.

Data on Wednesday also showed Japan’s current account surplus shrank sharply in December, as a persistent trade deficit and a weakened yen weighed. The reading, coupled with a rash of weak earnings raised concerns over slowing economic growth in the country.

Broader Asian stocks advanced, with risk-heavy Southeast Asian stocks among the best performers for the day. Philippine shares jumped more than 1% and were the best performers in the region.

But regional markets were reeling from a hotter-than-expected U.S. jobs report last week, which gives the Fed enough economic headroom to keep raising interest rates. A higher U.S. rate environment is negative for Asian markets, as it dries up foreign capital inflows to the region.

Chinese stocks were muted as markets awaited inflation data for January due later this week. The reading is expected to shed more light on a potential economic recovery after the country relaxed most anti-COVID measures earlier this year.

Indian stocks rose, with the BSE Sensex 30 and Nifty 50 indexes adding 0.3% and 0.6%, respectively, in anticipation of a Reserve Bank of India meeting. The central bank is widely expected to hike rates by 25 basis points and announce a pause to its rate hike cycle, given the recent downturn in inflation.

Shares of firms under beleaguered conglomerate Adani Group extended their recovery into a second consecutive session after the group said it will start trimming its debt levels.

Adani Enterprises Ltd (NS:ADEL), the group’s flagship firm, jumped 10%.