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HomeBUSINESS & FINANCEOn optimism, markets rise. Fed's cycle of rate hikes is about to...

On optimism, markets rise. Fed’s cycle of rate hikes is about to end

A rally in IT giants helped Hong Kong’s Hang Seng Index take the lead in advances throughout Asia.

The Federal Reserve’s long-running campaign of interest rate increases may be coming to a stop, according to statistics that showed US inflation increased less than anticipated last month, which sparked a surge in Asian markets on Thursday.

This week, traders already had a spring in their step as a result of indications that the bank’s monetary tightening policies were beginning to take effect. This fueled speculation that this month’s anticipated hike would be the final one in a longer cycle.

The consumer price index dropped to 3.0 percent in June, the lowest level since March 2021, and dramatically down from 4.0 percent in May, according to the Labor Department, lifting the mood even further on Wednesday. The Fed has set a two percent goal.

In addition, the “core” rate, which does not include the erratic food and energy components and is thought to be a better indicator of underlying inflation, dropped to its lowest level since 2021.

The figures come after last week’s better-than-anticipated personal consumption expenditures data, which is the Fed’s favorite indicator. They have fueled speculation that the bank may raise rates just one more this month before ceasing all rate increases.

In addition, analysts noted that despite some signs of softening, the economy was still in good shape and the labor market was still strong, suggesting that the recession many had feared earlier this year may be avoided.

Lael Brainard, director of the National Economic Council and a former vice chair of the Fed, told the Economic Club of New York that the economy was defying expectations that inflation wouldn’t decline in the absence of large job losses.

Also on Wednesday, the “beige book” survey of the economy by the Fed revealed that activity had increased since late May as a result of robust tourism and travel.

The Nasdaq rose more than one percent on Wall Street as a result of the most recent numbers, since tech firms are particularly susceptible to borrowing prices. Asia gladly took up the slack, with Hong Kong up more than 2% and gains of over 1% in Tokyo, Sydney, Seoul, Singapore, Taipei, and Manila.

As well up were Shanghai, Jakarta, and Wellington.

In addition, the dollar struggled to recover from Wednesday’s losses relative to its key rivals, with the JPY remaining below 139 to the dollar, sterling clinging to a 15-month high of $1.30, and the euro trading at multi-month highs.

On the assumption that China’s crackdown on the industry is about to stop, Hong Kong’s tech giants were among the greatest performers on the Hang Seng Index.

State media reports that Premier Li Qiang met with executives from industry heavyweights including Alibaba and TikTok’s Chinese rival Douyin on Wednesday helped to fuel this optimism.

For a “healthy development” of the digital economy, Li “listened to the opinions and suggestions” of the sector, according to broadcaster CCTV.

There were representatives from the cloud computing division of Alibaba, e-commerce juggernauts JD.com and Pinduoduo, and social media platforms Douyin and Instagram-like Xiaohongshu.

According to CCTV, Li expressed his hope that several digital businesses will have a firm belief in the future.

Last week’s enforcement of substantial fines against Tencent and Alibaba affiliates involved in the financial industry was taken as a hint that the grueling campaign was coming to an end.

Traders are also keeping a close eye on any pronouncements coming out of Beijing, where officials have pledged to support the faltering real estate market and have hinted that further growth-improving measures may be released.

important figures at 02:30 GMT

The Nikkei 225 index in Tokyo is up 1.3 percent at 32,357.04 (pause).

2.3 percent higher at 19,292.09 on the Hong Kong Hang Seng Index.

Shanghai Composite: Up 0.7 percentage points at 3,218.85

Up from $1.1138 on Wednesday, the euro/dollar is now at $1.1140.

Dollar to yen: up at 138.52 yen from 138.47 yen.

Dollar/pound: up at $1.3010 from $1.2992

Euro to pound: up from 85.70 pence to 85.73 pence

0.1 percent higher at $75.80 per barrel for West Texas Intermediate.

Up 0.1 percent at $80.19 per barrel, Brent North Sea crude

At the close in New York, the Dow was up 0.3 percent.

London’s FTSE 100 is up 1.8% at 7,416.11 as of the close.

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