Asian markets extend new year rally on China, Fed hopes

HONG KONG - Asian markets resumed their strong start to the year Monday, tracking a surge on Wall Street fuelled by optimism over China's reopening and hopes the Federal Reserve will slow its pace of interest rate hikes.

All three main indexes in New York soared more than two percent Friday after a closely watched report showed a forecast-busting rise in new jobs but a slowdown in wages growth.

That came as separate figures showed a shock contraction in the crucial services sector -- the first since spring 2020 at the height of the pandemic.

The readings, while suggesting the world's top economy was showing signs of weakness, were seized on by traders hopeful that the Fed will begin to temper its monetary tightening campaign.

Investors are now betting officials will lift borrowing costs about 25 basis points at their next meeting at the end of the month.

However, policymakers have warned that rates will continue to go up as they aim to bring decades-high inflation under control, with some saying they will not likely be cut until 2024.

In a further sign of hope, data Friday showed eurozone inflation slowed for a second month in a row in December, to 9.2 percent -- the first time in single digits since September.

"If Friday's price action tells us anything it's that investors really want to believe the peak inflation narrative that has helped support the rebound in equity markets that we've seen so far this year," said CMC Markets analyst Michael Hewson.

Asian equities started the day on the front foot, with Hong Kong sharply higher and Shanghai also well up.

Traders in the two cities have been on a high at the start of the year as they welcome China's emergence from zero-Covid as well as pledges to help the struggling economy, particularly the property sector.

The borders between Hong Kong, Macau and China were partially opened Sunday, providing a much-needed boost to Hong Kong. Macau-based casinos surged on the move.

"The U-turn in China's Covid policy is consequential to growth and equity returns," said SPI Asset Management's Stephen Innes.

"So with the lifting of border restrictions between China/Hong Kong/Macau and international travel reopening, local travellers are not only in a celebratory mood but also investors."

Sydney, Seoul, Singapore, Taipei, Manila, Mumbai, Bangkok and Wellington also enjoyed a strong start to the week. Tokyo was closed for a holiday.

London and Frankfurt rose at the open but Paris dipped.

Easing expectations about US rates were also weighing on the dollar, which extended Friday's retreat against its major peers.

Oil prices rose, having plunged around eight percent last week on demand concerns caused by a spike in Covid infections in China as containment measures are lifted.

However, while the commodity is now at more than a one-year low, observers say it could rally again as China reopens and the global economy recovers.

"I think oil will go upwards of $140 a barrel once Asia fully reopens, assuming there will be no more lockdowns," said hedge fund manager Pierre Andurand. He added that the "market is underestimating the scale of the demand boost that it will bring".

Key figures around 0820 GMT 

Hong Kong - Hang Seng Index: UP 1.9 percent at 21,388.34 (close)

Shanghai - Composite: UP 0.6 percent at 3,176.08 (close)

London - FTSE 100: UP 0.2 percent at 7,714.36

Tokyo - Nikkei 225: Closed for a holiday

Dollar/yen: DOWN at 132.00 yen from 132.13 yen on Friday

Euro/dollar: UP at $1.0690 from $1.0647 

Pound/dollar: UP at $1.2156 from $1.2095

Euro/pound: DOWN at 87.94 pence from 88.01 pence

West Texas Intermediate: UP 1.9 percent at $75.20 a barrel

Brent North Sea crude: UP 1.9 percent at $80.04 a barrel

New York - Dow: UP 2.1 percent at 33,630.61 (close)

-- Bloomberg News contributed to this story --

Agence France-Presse

Equity markets and oil bounce back after last week's tumble

HONG KONG - Stocks and oil rallied Monday on bargain-buying after last week's blow-out, with traders tracking a healthy Wall Street performance fuelled by comments from a top Federal Reserve official that the spread of the Delta variant could cause him to reconsider plans to taper monetary policy.

Fears about the Covid mutation have rattled world markets as it forces some governments to reimpose containment measures, while sentiment was jolted further last week by minutes from the Fed's July meeting indicating it could start withdrawing its vast financial support by year's end.

The colossal bond-buying program and record-low interest rates have been a key pillar of the global recovery for more than a year, and the prospect of the cash being withdrawn has stalled that advance.

However, Dallas Federal Reserve boss Bob Kaplan, who is considered a policy hawk, suggested he could rethink his view to taper soon in light of the Delta variant's spread, which is showing signs of hobbling economic growth.

"The thing that I am going to be watching very carefully over the next month, before the next (Fed) meeting, is (whether) it is having a more material impact on slowing demand and slowing GDP growth," he said.

"I'm going to keep an open mind on that, and if it is having a more negative effect that might cause me to adjust my views somewhat from ones that I've stated."

Observers said the general consensus is that even when the Fed finishes winding back support, it is unlikely to immediately start hiking interest rates.

"Markets react to interest-rate hikes much more than tapering and we expect a pause between tapering and the first hike, suggesting liftoff in 2023 and not before," said Esty Dwek of Natixis Investment Managers.

BITCOIN BACK ABOVE $50K

Focus is now on Fed chief Jerome Powell's speech to the Jackson Hole annual conference of central bankers and finance chiefs, with hopes for a clue about a taper timetable.

All three main indexes on Wall Street rallied Friday, and Asia picked up the baton at the start of the week.

Tokyo jumped 1.8 percent while Shanghai, Bangkok and Jakarta were all up more than one percent. Hong Kong, which sank nearly six percent last week, was also up with Sydney, Seoul, Wellington and Mumbai. Taipei jumped more than two percent.

London, Paris and Frankfurt opened sharply higher.

The positive start was mirrored in oil markets, with both main contracts enjoying big gains, having suffered heavy losses recently owing to concerns that the Delta spread would impact demand as countries restrict people's movements.

Crude also rallied, helped by a dip in the dollar caused by the Kaplan remarks, while the observers said concerns over demand could prompt OPEC and other major producers to reconsider plans to increase output each month.

Still, while the week has got off to a healthy start, investors remain cautious about Delta's effect on the recovery outlook, while China's ongoing regulatory clampdown is also keeping optimism in check. 

Bitcoin broke back above $50,000 for the first time since mid-May, boosted by bargain-buying and leading some to predict the cryptocurrency could now be on course to hit $100,000.

"We're seeing some very bullish signs here," Vijay Ayyar, head of Asia-Pacific with crypto exchange Luno in Singapore, said. The currency could "test all-time highs again", he added. Bitcoin hit a record of almost $65,000 in April before suffering a sharp sell-off over the following months.

Agence France-Presse