Asian stocks rally on softer U.S. CPI, Fed meeting awaited

By Ambar Warrick

Investing.com-- Asian stock markets rose sharply on Wednesday as softer-than-expected U.S. inflation data ramped up hopes of slowing interest rate hikes, although sentiment still remained cautious in anticipation of more signals on monetary policy from the Federal Reserve.

Technology-heavy bourses gained the most in Asia, with South Korea’s KOSPI, Hong Kong’s Hang Seng, and the Taiwan Weighted index rising between 1% and 1.4%.

Asian tech stocks were boosted by a report that the Chinese government is planning a massive $143 billion stimulus package to help local chipmaking firms weather U.S. restrictions on semiconductor imports.

China’s blue-chip Shanghai Shenzhen CSI 300 index rose 0.6%, while the Shanghai Composite index added 0.3%. Concerns over rising COVID-19 cases in the country weighed on local stocks, even as the government relaxed more restrictions.

Technology stocks were heavily sold off this year as rising yields saw investors discounting future earnings from the sector. But the sector is primed for a sharp recovery on the prospect of slower rate hikes.

Overnight, the NASDAQ Composite also outperformed its peers on Wall Street, as data showed U.S. consumer price index inflation eased more than expected in November. The reading drummed up hopes that the Federal Reserve will now slow its pace of rate hikes, thanks to easing price pressures.

The central bank is set to raise rates by 50 basis points (bps) at the conclusion of a two-day meeting on Wednesday. But focus is squarely on an address by Chair Jerome Powell after the meeting for more cues on the path of interest rates.

Markets are now pricing in the possibility of a 25 bps hike by the Fed during its first meeting for 2023. But traders were also cautious over any reiteration of the Fed’s hawkish stance, given that inflation is still trending well above the central bank’s target range.

Japan’s Nikkei 225 index added 0.8%, even as data showed sentiment among the country’s biggest manufacturers worsened in the fourth quarter. But the outlook for the services industry remained upbeat in the wake of a post-COVID boom.

Still, a separate reading showed that a decline in the country’s industrial production nearly doubled in October from the prior month, signaling more near-term weakness in the economy.

Indian stocks were somewhat muted in anticipation of wholesale price inflation data due later in the day. The Nifty 50 and BSE Sensex 30 indexes rose 0.4% and 0.3%, respectively.