Positive climate in Asia, on the ‘backs’ of Wall Street – 2.64% jump for the Nikkei

A positive mood prevails in the markets of the Asia-Pacific region on Wednesday, closely following the euphoria that prevailed on Tuesday on Wall Street.

On the board, the Japanese Nikkei gained 2.64% to 27,672.50 points, with the South Korean KOSPI to record gains of 0.65%, while in Hong Kong the Hang Seng increases by 1.55%. In mainland China, Shanghai is up 0.67%, with Shenzhen to earn 0.29%. In Taiwan, the Taiwan Weighted closed with a rise of 0.27%, while in Australia, the S&P/ASX 200 gained 1.65%.

Reserve Bank of Australia governor Philip Lowe said earlier that the country’s second-quarter inflation data will be released next week and will be higher, adding that a way back must be found of at the levels of 2% to 3%.

Average inflation in the country in the first quarter of the year was 5.1%. In his speech, Mr Lowe noted that the neutral rate (which corresponds to a policy that neither facilitates nor hinders growth) is now at a minimum of 2.5%, while the current level of the Australian central bank’s key rate is to 1.35%.

China’s central bank, moreover, kept its key lending rate unchanged, in line with market expectations, despite an increase in financial risk amid slowing economic growth.

China’s central bank emphasized that kept the one-year rate steady at 3.7% and the five-year interest rate at 4.45%, according to its announcement.

Analysts had expected it to keep the one-year interest rate unchanged, and earlier this month it had kept the medium-term lending facility unchanged.

While the move was expected, analysts had expected the central bank to ease further to address rising financial risks stemming from the country’s property market and several small banks.

Some economists had expected that the central bank might lower banks’ reserve requirement ratio soon to replenish liquidity in the banking system.

The central bank also injected 3 billion yuan ($444.9 million) of funds through seven-day repurchase agreements.

In addition to the jump on Wall Street, investor sentiment was boosted by reports that Russia and Ukraine are nearing an agreement to end the blockade of the latter’s grain exports, while the German-Russian Nord Stream 1 pipeline is likely to restart after maintenance work is completed in in July.

However, the rally is expected, according to analysts, to be short-lived, as concern about the effects of monetary policy tightening by the Fed and other central banks remains.

In corporate news, Japanese carmaker Toyota said its August production is expected to hover around 700,000 vehicles, down from an earlier forecast of 850,000, due to parts shortages related to restrictions and disruptions caused by the Covid pandemic.

Toyota shares rose 0.28% on Wednesday.