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BANGKOK — Shares rose in thin trading in Asia on Monday after the Christmas holiday, with markets in Hong Kong, Sydney and several other locations closed.
Tokyo’s Nikkei 225 index rose 0.6% to 26,393.32 and Seoul’s Kospi rose 0.2% to 2,318.54. The Shanghai Composite Index rose 0.5% to 3,061.93 and the SET in Bangkok rose 0.6%.
Bank of Japan Governor Haruhiko Kuroda hinted in a widely publicized speech on Monday that the central bank does not intend to reverse its long-standing policy of monetary easing to deal with inflationary pressures on the world’s third-biggest economy.
Last week, markets were shaken by a slight adjustment in the target range for long-term Japanese government bond yields, which was taken as a sign that the Bank of Japan may finally be scaling back its massive support for the economy through ultra-low interest rates, along with bond purchases and other purchases assets.
A widening interest rate differential in Japan and elsewhere has pulled the Japanese yen sharply lower against the US dollar and other currencies, amplifying the impact of higher costs on many imported products and commodities.
But the BOJ kept interest rates on hold at minus 0.1%, cautious on recession risks.
Kuroda told Keidanren, the country’s most powerful corporate group, that with the likely downward pressure on national economies and the Japanese economy not yet fully recovering from the impact of the pandemic, the BOJ “deems it necessary to implement monetary easing, thereby strengthening the economy sustainably.” support . …”
On Friday, the S&P 500 reversed a 0.7% loss to close 0.6% higher at 3,844.82. With one week of trading left in 2022, the benchmark index is down 19.3% for the year.
The Dow Jones Industrial Average rose 0.5% to 33,203.93, while the tech-heavy Nasdaq rose 0.2% to 10,497.86.
Small company stocks also rose. The Russell 2000 Index was up 0.4% to 1,760.93.
Mixed economic news weighed on stocks early, but indices rebounded late afternoon amid relatively weak trading ahead of the long bank holiday weekend. Markets in the US and Europe will remain closed on Monday.
Markets are in a tough spot where relatively healthy consumer spending and a strong labor market are reducing the risk of a recession but also increasing the risk of higher interest rates from the Federal Reserve as it ramps up its anti-inflation campaign.
The government reported on Friday that a key measure of inflation is continuing to slow, although the inflation gauge in the consumer spending report was still far higher than anyone cares to see. Consumer spending growth also weakened more than expected last month, but incomes were slightly stronger than expected.
Last week’s reports were the last major US economic updates of the year. Investors will soon turn their focus to the next round of corporate earnings.
The Fed has said it will continue raising interest rates in a bid to tame inflation, although the pace of inflation has continued to slow. The Fed’s overnight interest rate is at its highest level in 15 years after starting the year at a record low of around zero. The benchmark interest rate, the federal funds rate, is in a range of 4.25% to 4.5%, and Fed policymakers have forecast that the interest rate will reach a range of 5% to 5.25% by the end of 2023 .
With persistently high inflation, “many are beginning to believe that the main thing is that there will be no room for Fed cuts in the year ahead and that central banks will keep rates at these relatively high levels until underlying inflation really cracks – and that process will take time,” SPI Asset Management’s Stephen Innes said in a comment.
The Fed’s forecast does not call for a rate cut until 2024, and higher rates have raised concerns that the economy could falter and slide into recession in 2023. High interest rates have also weighed heavily on stock and other asset prices.
In currency trading late Friday, the US dollar slipped from 132.82 yen to 132.62 Japanese yen. The euro rose to $1.0629 from $1.0614.
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