Asia stocks gain for first time in four sessions: Markets wrap

Shares climbed in Asia following advances in Japanese and South Korean stocks as trading resumed after a holiday while US equity futures fell ahead of inflation data due later Tuesday.

MSCI’s Asia-Pacific equity index rose for the first time in four days, paced by stocks in South Korea, where the benchmark Kospi index is set to erase year-to-date losses as expectations for a regulatory push to boost the local stock market continue. Markets are closed in China, Hong Kong, Taiwan and Vietnam for Lunar New Year holidays.

The yen fell slightly Tuesday to trade around 149 per dollar, down from 140 at the start of the year. Recent softness reflects comments from Bank of Japan officials that the central bank will be in no hurry to exit supportive policy. The economy is seen returning to an annualized growth of 1.2% in the fourth quarter after a bruising contraction in the summer.

SoftBank Group Corp., one of Japan’s largest listed companies, surged as much as 11% in early trading after further gains for Arm Holdings Plc, in which it holds a stake. Arm shares jumped 29.2% in New York trading Monday and have almost tripled since listing in September. Japanese chipmaking equipment manufacturer Tokyo Electron Ltd., saw its stock soar to a record high on sales strength.

“In addition to the strong US market performance yesterday, the Arm shares surge also have been a tailwind for the Japanese semiconductor sector, which has a large weighting in the market,” said Masahiro Yamaguchi, senior market analyst at SMBC Trust Bank Ltd. “The weakened yen has also been helping Japanese stocks.”

Strong demand for chips, bolstered by expectations the coming boom in artificial intelligence will be a boon for manufacturers, helped Nvidia Corp. rise Monday — and briefly surpass the market value of Amazon.com Inc.

“What you’re seeing here is a feeding frenzy for anything to do with AI,” said Dennis Dick, trader at Triple D Trading. “Algos are getting involved, retail traders are getting involved, people are buying options. All that is just snowballing.”

Treasuries were steady in Asia ahead of January’s US consumer price index report due later Tuesday. The report is expected to show the first reading below 3% for year-over-year headline inflation since March 2021, supporting the disinflation narrative that has helped equities rally in recent months.

Federal Reserve Bank of Richmond President Thomas Barkin said one simmering risk to inflation falling back toward the central bank’s target comes from US businesses. Many have boosted profit margins by raising prices in recent years — a practice that may be difficult to amend and one that would provide upward pressure for inflation.

Bond traders are now more in line with the Fed’s rate trajectory, but strategists at Citigroup Inc. say the market is overlooking the risk of rate increases following the easing cycle.

“The market should price in some risk of future hikes – look to 1998,” Jason Williams, global market strategist at Citigroup, wrote in a note. This cycle “could be more akin to the 1998 easing cycle, which was short-lived and led to more rate hikes. If inflation does not return to a consistent 2% the upside tails around future Fed hikes should increase from this very depressed level.”

Elsewhere in Asia, a report Tuesday showed Australia’s consumer confidence climbed to a 20-month high in February, while New Zealand dollar fell to an intraday low following the release of inflation expectations data.

Earlier, the European Union proposed new trade restrictions on firms accused of supporting Russia’s war efforts in Ukraine, including three based in China. If adopted, it would be the first time the EU has imposed restrictions on companies in mainland China since the invasion.

Bitcoin touched $50,000 for the first time since December 2021, aided by the record-breaking debut of US exchange-traded funds for the token.

Oil was steady after a six-day rally ahead of a market outlook from OPEC, and as traders also monitored developments in the Israel-Hamas war. Morgan Stanley raised its year-end oil price forecast on signs of tighter supply. Gold was little changed after falling slightly Monday to trade at around $2,020 per ounce Monday.

Key Events this Week:

Germany ZEW survey expectations, Tuesday
US CPI, Tuesday
Eurozone industrial production, GDP, Wednesday
BOE Governor Andrew Bailey testifies to House of Lords economic affairs panel, Wednesday
Chicago Fed President Austan Goolsbee speaks, Wednesday
Fed Vice Chair for Supervision Michael Barr speaks, Wednesday
Japan GDP, industrial production, Thursday
US Empire manufacturing, initial jobless claims, industrial production, retail sales, business inventories, Thursday
ECB President Christine Lagarde speaks, Thursday
Atlanta Fed President Raphael Bostic speaks, Thursday
Fed Governor Christopher Waller speaks, Thursday
ECB chief economist Philip Lane speaks, Thursday
US housing starts, PPI, University of Michigan consumer sentiment, Friday
San Francisco Fed President Mary Daly speaks, Friday
Fed Vice Chair for Supervision Michael Barr speaks, Friday
ECB executive board member Isabel Schnabel speaks, Friday