GLOBAL MARKETS-Asian stocks make 7-month highs, Australian dollar gains on hot inflation

By Anshuman Daga

SINGAPORE, Jan 25 (Reuters) – Asian equities scaled
their highest levels in seven months on Wednesday after some
regional markets reopened after holidays, and the Australian
dollar hit multi-month highs as surging inflation made higher
interest rates more likely.

MSCI’s broadest index of Asia-Pacific shares outside Japan
rose 0.2% to a seven-month high but traded below
the day’s peak. South Korean shares gained 1.3%, Nikkei
put on 0.4% and Singapore jumped 1.6%.

Trading volume was depressed as Chinese and Taiwan markets
were still closed for the Lunar New Year holidays.

European markets were headed for a weak opening, with
Eurostoxx 50 futures down 0.3%, German DAX futures
eased 0.2% lower and FTSE futures were steady.

E-mini futures for the S&P 500 shed 0.5% and Nasdaq
futures lost 0.8%.

Globally, stocks have posted strong gains this year after a
torrid 2022, based on expectations that inflation is close to
peaking and the rise in U.S. interest rates will taper off. The
dismantling of COVID controls in China and the re-opening of its
borders have further boosted investor sentiment.

“The market continues to price for a dream scenario of
inflation having peaked then coming down sharply, but not
overshooting to the downside; only the very mildest of
recessions by any historical standards,” Rabobank’s global
strategist Michael Every said in a report.

The MSCI’s Asia index has rallied 9% so far this year after
slumping nearly 20% in 2022.

U.S. stock indexes closed mixed on Tuesday after companies
reported better than expected profits, while warning of a
difficult year ahead. Data showed U.S. business activity
contracted for a troubling seventh straight month in January.

Shares in Microsoft gave up most of their 4% gains
posted in after-hours trade. The tech titan’s
better-than-expected results showed some strength in the face of
a weak economy but weak revenue growth signalled tougher times
for the sector.

MSCI’s all-country world index eked out a
fresh five-month closing high on Tuesday.

Stronger-than-expected economic data in Europe eased market
worries of a sharp recession there, but interest rates are still
seen creeping higher despite declining energy prices reducing
inflationary pressure.

The euro edged towards a nine-month peak of $1.0927
against the dollar, as euro bulls were encouraged by a rosier
growth outlook for the euro zone against signs of a recession
looming in the United States.

Australian equity markets fell 0.3% on Wednesday
after a shock surge in inflation to a 33-year high in the last
quarter of 2022 reinforced the case for the Reserve Bank of
Australia to keep raising interest rates.

Investors sharply narrowed the odds on RBA lifting its cash
rate by a quarter point to 3.35% when it meets on Feb. 7.
Previously, some analysts had thought there was a chance that
the RBA might pause its tightening campaign, but the pace of
inflation put paid to that.

The New Zealand dollar slid after New Zealand
reported annual inflation of 7.2% in the fourth quarter, below a
central bank forecast of 7.5%.

U.S. crude oil prices were stable at $80.3 a barrel after
falling in the previous session as preliminary data indicated a
bigger than expected rise in U.S. oil inventories.

Gold prices dipped to $1,927 per ounce, off a nine-month
peak touched in the previous session.

(Editing by Simon Cameron-Moore)