Asian Stocks Bounce Back From Recent Losses, But Fed Jitters Cap Gains

By Ambar Warrick

Investing.com-- Asian stocks recovered from recent losses on Tuesday, tracking a late-session rebound on Wall Street, although anticipation of a Federal Reserve meeting this week kept bigger gains in check.

Hong Kong’s technology-heavy Hang Seng index was the best regional performer, rising 1.4%, while Australia’s S&P/ASX 200 index added 1.3% on strength in heavyweight lending and mining stocks.

Wall Street indexes rose overnight, rebounding from recent losses with technology stocks leading the charge. But sentiment remained fragile before the start of a two-day Fed meeting on Tuesday.

The U.S. central bank is widely expected to raise interest rates by 75 basis points (bps), although traders are also considering the slim possibility of a full 100 bps hike after hotter-than-expected U.S. inflation data last week.

The Fed has raised interest rates four times so far this year, and is likely to signal more hikes with inflation pinned to 40-year highs. Rising U.S. interest rates are expected to weigh on economic growth, which has dented sentiment toward risk-driven assets.

But the Fed won’t be alone in raising rates this week. Central banks in Indonesia and Philippines are also expected to hike interest rates this Friday, with inflation trending higher across the globe.

China’s bluechip Shanghai Shenzhen CSI 300 index rose 0.3% on Tuesday, lagging regional peers after the People’s Bank maintained its loan prime rate amid steep declines in the yuan. The central bank now faces a balancing act of loosening monetary policy while also supporting the yuan.

Slowing economic growth in China, driven by its zero-COVID policy, has seen the government roll out a series of stimulus measures to spur a recovery. But recent indicators suggest the Chinese economy has a long road ahead before reaching pre–COVID levels.

Japan’s Nikkei 225 index rose 0.4%, even as data showed consumer inflation touched a near eight-year high in August. The reading indicates increasing price pressures on the economy from high commodity prices and a softening yen.

The Bank of Japan is set to decide on monetary policy this week. But the central bank has given no indication that it plans to raise lending rates from negative levels.