Muted Trading Spurs Positive Momentum in Asia’s Markets

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Asian stocks rose in muted trading on Friday, with investors buying into bargains as Wall Street benchmarks had fallen the previous day due to fears that the U.S. Federal Reserve will continue to increase interest rates.

Yeap Jun Rong, the market analyst at IG, said in a report, “Overall risk sentiments could lean more toward a wait-and-see in the lead-up to the U.S. job report later, lacking a clear conviction in the market direction from Wall Street over the past few days.”

Japan’s benchmark Nikkei 225 NIK, +0.59%, rose 0.8%, South Korea’s Kospi managed a 1.3% gain, and Hong Kong’s Hang Seng edged up by 0.5%.

Analysts say that lingering worries about global trade tensions were likely behind many investors’ decisions to adopt a wait-and-see approach to trading this week, coupled with concern that the Fed may raise interest rates again later this year or early next year.

Traders question whether equity valuations remain too high, given recent market volatility and uncertainty around global economic growth prospects.

On Thursday, the S&P 500 SPX, +2.28%, dropped 1.2% to 3,808.10, with a decline of 46 points from its previous close. This drop marked its fourth fall in succession, bringing its total losses to 1.7%. The Dow DJIA, +2.13%, dropped by 331 points to 32,930.08. The Nasdaq Composite COMP, +2.56%, fell by 1.5% to 10,305.24.

ADP reported a larger-than-expected increase in jobs at private companies last month. The U.S. government also noted that the number of Americans applying for unemployment benefits fell to its lowest level, indicating that labour market recovery is still well underway despite recent signs of slowing job growth.

The U.S. Federal Reserve has raised interest rates seven times, with the benchmark lending rate currently standing at 4.25% to 4.5%. As fears of inflation and rising job growth continue, economists now forecast that the Fed will raise its interest rate range to 5% to 5.25% by the end of 2023.

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