# Asian stocks make 7-month highs, Australian dollar gains on hot inflation
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-25
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Asian Equities Hit Seven-Month Highs Amid Inflation Surge
Meta Description: Explore the latest in Asian equities as markets hit multi-month highs on rising inflation and potential interest rate hikes. Get all the details here.
URL: https://financedigest.com/asian-stocks-make-7-month-highs-australian-dollar-gains-on-hot-inflationhtml

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By Anshuman Daga

SINGAPORE (Reuters) -Asian equities scaled their highest levels in seven months on Wednesday after some regional markets reopened after holidays, and the Australian dollar hit multi-month highs as surging inflation made higher interest rates more likely.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2% to a seven-month high but traded below the day’s peak. South Korean [shares gained](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook") 1.3%, Nikkei put on 0.4% and Singapore jumped 1.6%.

Trading volume was depressed as [Chinese and Taiwan markets were still closed for the Lunar New Year holidays](https://www.financedigest.com/chinese-fret-over-elderly-as-who-warns-of-holiday-covid-surge.html "Chinese fret over elderly as WHO warns of holiday COVID surge").

[European markets were headed for a weak opening](https://www.financedigest.com/jaguar-land-rover-opens-three-european-self-driving-tech-hubs.html "Jaguar Land Rover opens three European self-driving tech hubs"), with Eurostoxx 50 futures down 0.3%, German DAX futures eased 0.2% lower and FTSE futures were steady.

E-mini futures for the S&P 500 shed 0.5% and Nasdaq futures lost 0.8%.

Globally, stocks have posted strong gains this year after a torrid 2022, based on [expectations that inflation](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected") is close to peaking and the rise in U.S. [interest rates](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks") will taper off. The dismantling of COVID controls in China and the re-opening of its borders have further boosted [investor sentiment](https://www.financedigest.com/6-months-to-go-until-brexit-and-investor-sentiment-remains-bold.html "6 months to go until Brexit and investor sentiment remains bold").

The [market continues to price for a dream scenario of inflation](https://www.financedigest.com/hungarys-booming-wedding-market-doused-by-soaring-inflation.html "Hungary’s booming wedding market doused by soaring inflation") having peaked then coming down sharply, but not overshooting to the downside; only the very mildest of recessions by any historical standards,” Rabobank’s global strategist Michael Every said in a report.

The MSCI’s Asia index has rallied 9% so far this year after [slumping nearly 20%](https://www.financedigest.com/ubisoft-shares-slump-20-after-french-video-game-maker-warns-on-revenue.html "Ubisoft shares slump 20% after French video game maker warns on revenue") in 2022.

U.S. [stock indexes closed mixed on Tuesday after companies reported](https://www.financedigest.com/influx-of-one-time-investors-swapping-stocks-for-bricks-and-mortar-reports-agency.html "Influx of ‘one-time’ investors swapping stocks for bricks and mortar reports agency") better than expected profits, while warning of a difficult year ahead. Data showed U.S. business [activity contracted](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") for a troubling seventh straight month in January.

[Shares in Microsoft gave up most of their 4% gains](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") posted in after-hours trade. The tech titan’s better-than-expected results showed some strength in the face of a [weak economy but weak revenue growth signalled tougher times for the sector](https://www.financedigest.com/japans-factory-output-posts-biggest-fall-in-8-months-on-weak-autos-chips-sectors.html "Japan’s factory output posts biggest fall in 8 months on weak autos, chips sectors").

MSCI’s all-country [world index eked out a fresh five-month closing](https://www.financedigest.com/world-stocks-rally-nikkei-closes-at-33-year-peak.html "World stocks rally, Nikkei closes at 33-year peak") high on Tuesday.

Stronger-than-expected [economic data](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades") in Europe eased market worries of a sharp recession there, but interest rates are still seen creeping higher despite declining energy prices reducing inflationary pressure.

The [euro edged towards a nine-month peak of $1.0927 against the dollar](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"), as euro bulls were encouraged by a rosier growth outlook for the euro zone against signs of a recession looming in the United States.

Australian equity markets fell 0.3% on Wednesday after a shock surge in [inflation to a 33-year high in the last quarter of 2022 reinforced the case for the Reserve Bank](https://www.financedigest.com/bank-of-england-still-needs-to-see-the-job-through-on-inflation-pill.html "Bank of England still needs to ‘see the job through’ on inflation: Pill") of Australia to keep raising interest rates.

Investors sharply narrowed the odds on RBA [lifting its cash rate](https://www.financedigest.com/shares-steady-dollar-dips-as-us-holiday-lifts-rates-gloom.html "Shares steady, dollar dips as US holiday lifts rates gloom") by a quarter point to 3.35% when it meets on Feb. 7. Previously, some analysts had [thought there was a chance that the RBA might pause](https://www.financedigest.com/rebels-with-a-pause-for-thought.html "Rebels with a pause for thought:") its tightening campaign, but the pace of inflation put paid to that.

The New Zealand [dollar slid after New Zealand reported annual inflation](https://www.financedigest.com/stocks-and-gold-cheer-u-s-inflation-picture-while-dollar-slides.html "Stocks and gold cheer U.S. inflation picture, while dollar slides") of 7.2% in the fourth quarter, below a central bank forecast of 7.5%.

U.S. crude oil [prices were stable at $80.3 a barrel after falling](https://www.financedigest.com/buy-off-plan-to-beat-stalling-house-prices-and-falling-rental-yields-says-jean-liggett.html "“Buy off-plan to beat stalling house prices and falling rental yields” says Jean Liggett ") in the previous session as preliminary data indicated a bigger than expected rise in U.S. [oil inventories](https://www.financedigest.com/oil-falls-from-one-month-high-after-u-s-fuel-inventory-surge.html "Oil falls from one-month high after U.S. fuel inventory surge").

Gold prices dipped to $1,927 per ounce, off a nine-month peak touched in the previous session.

(Editing by Simon Cameron-Moore)


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