Asian shares edge higher after slight gains on Wall Street

THAILAND: Shares climbed in Asia on Tuesday after Wall Street benchmarks clawed back some losses from their worst week since early December.

Stocks have come under selling pressure as analysts have raised forecasts for how high the Federal Reserve will take interest rates and how long it will keep them to tame inflation that has failed to fall as much as expected given strong jobs growth and other signs of resilience in the economy.

Economies around the world have remained more resilient than feared, with China loosening its business-damaging anti-COVID restrictions and Europe avoiding a worst-case energy crisis.

“As we move into 'Turnaround Tuesday,' investors are debating whether January's inflation reflation was just another temporary bump in the road as the economy adjusts to a post-pandemic world,” Stephen Innes of SPI Asset Management said in a report. “The post-pandemic era continues to deliver unusual macroeconomic patterns.” Tokyo's Nikkei 225 index added 0.2 per cent to 27,487.85 and the Kospi in Seoul advanced 0.9 per cent to 2,424.89.

In Hong Kong, the Hang Seng gained 0.4 per cent to 20,030.25 while the Shanghai Composite index edged 0.1 per cent higher to 3,260.40. Australia's S&P/ASX 200 rose 0.5 per cent to 7,261.20.

Stocks have struggled in February after a strong start to the year. Robust economic data help calm fears that a recession may be imminent given the dampening impact of more costly borrowing on spending by consumers and businesses.

But they likely mean a longer spell of higher interest rates. The heightened expectations for rates have been most evident in the bond market, where yields have shot higher in recent weeks.

Earlier, analysts thought the Fed might soon ease back. Now the expectation is that it might raise rates above 5.25 per cent. The Fed's key overnight rate is now in a range of 4.50 per cent to 4.75 per cent, up from virtually zero at the start of last year.

On Monday, the S&P 500 rose 0.3 per cent to 3,982.24 for just its second gain in the last seven days. The Dow Jones Industrial Average gained 0.2 per cent, to 32,889.09, while the Nasdaq composite climbed 0.6 per cent to 11,466.98.

Shares of Union Pacific jumped 10.1 per cent for one of the market's biggest gains after the railroad announced plans to replace its CEO later this year. The company has been under pressure from a hedge fund with a big ownership stake in it.

The 10-year Treasury yield dipped to 3.92 per cent from 3.95 per cent late Friday. That yield helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, slipped to 4.79 per cent from 4.81 per cent. It's near its highest level since 2007.

Yields eased after a report showed that orders for machinery, aircraft and other long-lasting manufactured goods fell by more than economists expected in January.

Even Monday's weaker-than-expected report on durable goods had some underlying strength. After ignoring transportation-related equipment, orders jumped last month to the biggest gain since March, much stronger than the drop that economists expected to see.

Even with the worries about rates going higher than expected, the S&P 500 is still holding onto a gain of 3.7 per cent for the year so far, and shoppers are still continuing to spend at stores. Both can add upward pressure on inflation.

Most companies have already reported their results for the last three months of 2022. Among the couple dozen companies in the S&P 500 still scheduled to report this week are Advance Auto Parts, Kroger and Target.

Overall, this earnings reporting season has been lackluster. Companies in the S&P 500 are on track to report their first drop in earnings per share from a year earlier since the summer of 2020, according to FactSet.

In other trading Tuesday, US benchmark crude oil gained 24 cents to USD 75.91 per barrel in electronic trading on the New York Mercantile Exchange. It shed 64 cents to USD 75.68 on Monday.

Brent crude, the pricing basis for international trading, picked up 17 cents to USD 82.21 per barrel.

The US dollar rose to 136.29 Japanese yen from 136.20 yen. The euro slipped to USD 1.0593 from USD 1.0609.