As China opens up its economy and the US dollar starts to show weakness against other currencies, the bulls seem to be making a comeback in the Asian markets. On the first day of the second trading week of 2023, Asia’s leading stock indices are trading in green. Hang Seng Index was trading around 21,406.39, up by 414.75 points, higher by 1.98% than the previous day’s closing while the Shanghai Composite Index was trading around 3,180.35, up by 22.71 points, higher by 0.72% than the previous day’s closing.
While Japan was closed for a holiday, session advances were led by gauges in Hong Kong and South Korea. The MSCI Asia Pacific Index rose as much as 0.74% on Monday, more than doubling its gain since its October 24 low.
So far in 2023, the Asian benchmark is up 3.7%, outperforming the S&P 500 Index by about two percentage points. This comes after they both fell roughly 19% last year, their worst performance since 2008. The MSCI China Index is expected to rise another 15%, according to Goldman Sachs Group Inc.
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The Institute for Supply Management’s services index is in a contraction zone, and wage growth is slowing, so traders believe that the Fed will hold off on raising interest rates. As a result, the dollar continued to decline since last week. The dollar fell the most in more than three weeks as US data led some traders to expect smaller Federal Reserve interest-rate hikes in the future.
It is widely believed that China’s economic growth will quickly recover and return to its normal path as Beijing provides more financial assistance to households and businesses to aid in their recovery following the end of the country’s Covid-Zero policy.
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As the market evaluated the strength of the American economy and the potential effects of China’s reopening on global growth and inflation, U.S. stocks ended the day higher. S&P 500 increased by 2.28%. The Dow Jones Industrial Average rose 2.13%, while the Nasdaq Composite Index, which focuses on technology, increased 2.56%.
As of Friday’s close, the Dow industrials was up by 1.43% while S&P 500 and Nasdaq Composite were up about 1.45% and 0.98%, respectively, so far this year. Data showed the number of workers filing for unemployment benefits in the week ended Dec. 24 stood at 225,000, up slightly from 216,000 the week prior.
Nonfarm payrolls in the United States increased by 223,000 in December, down from 256,000 in November. This was also the slowest rate of increase in two years. While the unemployment rate fell to 3.5%, wage growth slowed. Other macroeconomic indicators were also dismal. For the first time since May’20, the US ISM non-manufacturing PMI fell into contraction (49.6 in December’22 versus 56.5). In the United States, factory orders fell 1.8% in November (estimated -0.8%), following a 0.4% increase in October. As the economy slows, investors expect the Fed to ease its stance.