Asian stocks rallied during sluggish Christmas trading as US and European markets closed

BANGKOK (AP) — Stocks rose Monday in Asia during sluggish post-Christmas trading, with markets in Hong Kong, Sydney and many other places closed.

Tokyo NIK Nikkei 225 Index,
+0.65%
gained 0.6% to 26,393.32 and the Kospi 180721,
+0.15%
in Seoul it added 0.2% to 2,318.54. The Shanghai SHCOMP Composite Index,
+0.65%
rose 0.5% to 3,061.93 and the SET SET,
+0.55%
in Bangkok it added 0.6%.

Bank of Japan Governor Haruhiko Kuroda indicated in a widely watched speech on Monday that the central bank does not plan to change its longstanding policy of monetary easing to address inflationary pressures on the world’s third largest economy.

Last week, markets were rocked by a slight adjustment of the target range for the long-term Japanese government bond yield, seen as a sign that the Bank of Japan may finally ease its massive support to the economy through interest rates. extremely low interest and purchases of bonds and other assets.

A widening interest rate gap in Japan and elsewhere caused the Japanese yen to fall sharply against the US dollar and other currencies and exacerbated the impact of higher costs for many imported commodities and raw materials.

But the BOJ kept its key lending rate at minus 0.1%, wary of recession risks.

Kuroda told Keidanren, the country’s most powerful business group, that with economies facing likely downward pressure and with Japan’s economy not fully recovering from the impacts of the pandemic, the BOJ “deems it necessary to conduct monetary easing and therefore firmly support the economy. …”

Friday, the S&P 500 SPX,
+0.59%
it reversed a 0.7% loss to close up 0.6% 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 DJIA,
+0.53%
rose 0.5% to 33,203.93, while the tech-heavy Nasdaq COMP,
+0.21%
up 0.2% to 10,497.86.

Small business stocks also rose. The Russell 2000 RUT index,
+0.39%
gained 0.4% to 1,760.93.

Mixed economic news weighed on shares early on, but the indices rebounded in the late afternoon on relatively light trading ahead of the long holiday weekend. The US and European markets will be closed on Monday.

Markets are in a tough spot where relatively solid consumer spending and a strong job market reduce the risk of a recession, but also increase the threat of higher interest rates from the Federal Reserve as it presses its campaign to crush inflation.

The government reported Friday that a key measure of inflation continues to slow, although the inflation gauge in the consumer spending report was still much higher than anyone cares to see. Also, consumer spending growth weakened more than expected last month, but incomes were a bit stronger than expected.

Last week’s reports were the last major US economic updates of the year. Investors will soon focus their attention on the next round of corporate earnings.

The Fed said it would continue to raise interest rates to tame inflation, even as the pace of price hikes continued to slow. The Fed’s key overnight rate is at its highest level in 15 years, after starting the year at an all-time low of around zero.

The key lending rate, the federal funds rate, is in the 4.25% to 4.5% range, and Fed policy makers have projected the rate to hit a range of 5% to 5.25%. by the end of 2023.

Given the persistence of high inflation, “many are starting to believe that the big story is that there will be no room for Fed cuts next year and that central banks will keep these rates relatively high until underlying inflation it’s not going to be truly cracked – and that process will take some time,” SPI Asset Management’s Stephen Innes said in a comment.

The Fed forecasts don’t call for a rate cut before 2024, and higher rates have raised fears that the economy could stall and slip into a recession in 2023. High rates also weighed heavily on stock prices and other investments .

In currency transactions, the US dollar DXY,
-0.10%
it slipped to 132.62 Japanese yen from 132.82 yen late Friday. The euro climbed to $1.0629 from $1.0614.

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