# Asia shares weigh China risks, yen hits 6-month high Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-01-03 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Asian Shares Rebound Despite COVID-19 Concerns Meta Description: Discover how Asian shares are bouncing back amidst COVID-19 challenges and potential for economic growth in the world's second-largest economy. URL: https://financedigest.com/asia-shares-weigh-china-risks-yen-hits-6-month-highhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-01-03t021228z1lynxmpej02012rtroptp4global-markets-1736814647017-compressed.jpg) By Wayne Cole SYDNEY (Reuters) – Asian shares recovered from early losses on Tuesday as investors weighed the near-term costs of the coronavirus infections in China against the longer-term benefits of a complete reopening of the world’s second-largest economy. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.5%, having been down more than 1.0% in choppy early trading. [Liquidity was lacking as Japanese markets](https://www.financedigest.com/zero-liquid-discharge-market-estimates-the-market-to-expand-at-8-to-9-cagr-from-2021-to-2031-2.html "Zero Liquid Discharge Market Estimates The Market To Expand At 8 to 9% CAGR From 2021 to 2031") were shut for a holiday, making for some choppy moves. Nikkei [futures were trading at 25,750 compared with the last close for the cash](https://www.financedigest.com/cash-me-if-you-can-the-future-of-contactless-commerce.html "Cash me if you can: The future of contactless commerce") index of 26,094. Investors were encouraged by a 1.3% bounce in the Hang Seng, which had been off more than 2% at one stage, while Chinese blue chips inched up 0.2%. A batch of surveys had showed China’s [factory activity](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") shrank at the sharpest pace in nearly three years as COVID-19 infections swept through production lines. China is entering the most dangerous weeks of the pandemic,” [warned analysts at Capital Economics](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike"). The authorities are making almost no efforts now to slow the spread of infections and, with the migration ahead of Lunar New Year getting started, any parts of the [country not currently in a major COVID](https://www.financedigest.com/u-s-cdc-lifts-covid-do-not-travel-recommendations-on-about-90-countries.html "U.S. CDC lifts COVID ‘Do Not Travel’ recommendations on about 90 countries") wave will be soon. Mobility [data suggested that economic](https://www.financedigest.com/oil-slumps-on-economic-data-stronger-u-s-dollar.html "Oil slumps on economic data, stronger U.S. dollar") activity was depressed nationwide and would likely remain so until the infection wave began to subside, they added. [Wall Street](https://www.financedigest.com/weary-wall-street-cheers-improved-consumer-confidence.html "Weary Wall Street cheers improved consumer confidence") was in a guarded mood, with S&P 500 futures and Nasdaq futures up 0.1%. EUROSTOXX 50 futures fell 0.6% and FTSE futures 0.1%. Data on U.S. payrolls this week are expected to show the labour market remains tight, while EU consumer prices could show some slowdown in [inflation](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc.html "UK shop price inflation hits record 8% in January: BRC") as energy prices ease. Energy base effects will bring about a sizeable reduction in inflation in the major economies in 2023 but stickiness in core components, much of this stemming from tight labour markets, will prevent an early dovish [policy ‘pivot’ by central banks,”](https://www.financedigest.com/what-to-make-of-the-headlines-brexit-and-bank-of-england-policy-eba-bank-stress-tests.html "What to make of the headlines? Brexit and Bank of England policy, EBA bank stress tests") analysts at NatWest Markets wrote in a note. They expect interest rates to top out at 5% in the United States, 2.25% in the EU and 4.5% in [Britain and to stay there for the entire year](https://www.financedigest.com/2043-the-year-britain-will-turn-cashless.html "2043: The year Britain will turn cashless"). Markets, on the other hand, are [pricing in rate cuts](https://www.financedigest.com/musk-says-tesla-price-cuts-triggered-demand-2023-sales-could-hit-2-million-vehicles.html "Musk says Tesla price cuts triggered demand, 2023 sales could hit 2 million vehicles") for late 2023, with Fed fund futures implying a range of 4.25 to 4.5% by December. Minutes of the Federal Reserve’s December meeting due this week will likely show many members saw risks that interest rates would need to go higher for longer, but [investors will be attuned to any talk](https://www.financedigest.com/virgin-orbit-says-space-startup-in-talks-with-potential-investors.html "Virgin Orbit says space startup in talks with potential investors") of pausing, given how far rates have already risen. While [markets have for a while priced](https://www.financedigest.com/german-residential-property-market-faces-risk-of-price-drop-diw-study.html "German residential property market faces risk of price drop – DIW study") in an eventual U.S. easing, they were badly wrong-footed by the Bank of Japan’s shock upward shift in its ceiling for [bond yields](https://www.financedigest.com/wall-st-stocks-fall-bond-yields-rise-as-china-drops-quarantine-rule.html "Wall St stocks fall, bond yields rise as China drops quarantine rule"). The BOJ is now considering raising its [inflation forecasts in January to show price growth close to its 2% target](https://www.financedigest.com/the-mouse-that-roared-new-zealand-and-the-worlds-2-inflation-target.html "The mouse that roared: New Zealand and the world’s 2% inflation target") in fiscal 2023 and 2024, according to the Nikkei. Such a move at its [next policy](https://www.financedigest.com/yen-trims-gains-as-possible-next-boj-governor-says-current-policy-appropriate.html "Yen trims gains as possible next BOJ governor says current policy appropriate") meeting on Jan. 17-18 would only add to speculation of an end to ultra-loose policy, which has essentially acted as a floor for [bond yields](https://www.financedigest.com/stocks-fall-bond-yields-rise-as-focus-shifts-to-fed-rate-outlook.html "Stocks fall, bond yields rise as focus shifts to Fed, rate outlook") globally. Japanese 10-year [yields have steadied](https://www.financedigest.com/german-yields-steady-spreads-tighten-after-recent-repricing.html "German yields steady, spreads tighten after recent repricing") just short of the new 0.5% ceiling, but only because the BOJ stepped in last week with unlimited buying operations. The policy shift boosted the yen across the board, with the [dollar losing 5% in December and the euro](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") 2.3%. The trend continued on Tuesday as the [dollar slid 0.9% to a six-month low of 129.52 yen](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles"), having breached major chart support at 130.40. The euro fell to its lowest in three months at 138.26 yen. The euro was [steady on the dollar](https://www.financedigest.com/shares-steady-dollar-gains-ahead-of-u-s-inflation-data.html "Shares steady, dollar gains ahead of U.S. inflation data") at $1.0679, after meeting resistance around $1.0715, while the dollar index was holding at 103.480. In commodity markets, [gold made a fresh six-month top](https://www.financedigest.com/olympics-freestyle-skiing-gu-lands-big-air-gold-china-moves-to-top-of-medals-table.html "Olympics-Freestyle skiing-Gu lands Big Air gold, China moves to top of medals table") of $1,842.99 an ounce. \[GOL/\] Worries about the state of global [demand saw oil prices](https://www.financedigest.com/oil-prices-rebound-after-opec-upgrades-china-demand-outlook.html "Oil prices rebound after OPEC upgrades China demand outlook") lower. Brent lost 41 cents to $85.50 a barrel, while U.S. crude fell 33 cents to $79.3 per barrel. (Reporting by Wayne Cole; Editing by Bradley Perrett and Sam Holmes) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---