Asian Stocks Rise Tracking Wall Street Rebound, But Outlook Uncertain

By Ambar Warrick 

Investing.com-- Asian stock markets rose on Thursday, tracking an overnight recovery on Wall Street as a dollar rally paused, but concerns over rising interest rates and a looming recession kept the outlook dim.

Stocks in Japan, China and Southeast Asia rebounded sharply from steep losses this week, with sentiment also improving after the Bank of England intervened in bond markets to prevent a financial meltdown in the country. 

Technology-heavy indexes including Hong Kong’s Hang Seng and South Korea’s KOSPI were among the best performers for the day, rising more than 1% each. 

Wall Street indexes were also supported by tech majors during the overnight session, as the dollar and Treasury yields retreated from recent peaks. But the tech sector remains the hardest hit by rising interest rates this year, as markets discounted future earnings against a strengthening dollar. 

Traders remained uncertain over Thursday’s gains, given that the factors behind a recent stock market rout were still in play. 

Central banks across the globe are expected to keep hiking interest rates this year as they contend with a major jump in inflation. Fears of a potential recession- stemming from high inflation and interest rates- also kept investors on edge. 

Rising U.S. interest rates have weighed heavily on Asian markets this year, with the pressure expected to persist in the coming months. A slew of Federal Reserve officials also reinforced expectations this week that the central bank will keep tightening policy aggressively.

But the Fed isn't alone in raising rates. The European Central Bank recently hiked rates and signaled more raises as it moves to normalize monetary policy. The Bank of England is also expected to raise rates sharply in order to support the pound, which sank to record lows this week. 

In Asia, India’s bluechip Nifty 50 index rose 0.6% ahead of a widely-expected interest rate hike by the central bank on Friday. The Reserve Bank is also contending with rising inflation and a sinking rupee. 

China’s bluechip Shanghai Shenzhen CSI 300 index rose 0.5%, cheered by more stimulus measures from the government. The country distributed about 300 billion yuan ($42 billion) allocated for infrastructure projects through three state policy banks, as it looks to shore up economic growth by undertaking large public infrastructure projects.

Focus is also on Chinese manufacturing data due on Friday, which is expected to show a continued decline in activity.