Asian markets extend US rally ahead of inflation, Fed decision

Asian markets mostly rose Tuesday, with nervous investors sitting tight ahead of key US inflation data and a Federal Reserve policy decision but fresh pledges by China to open up from zero-Covid offering support.

The gains across the region came after Wall Street's three main indexes raced out of the traps Monday, with analysts citing a survey by the central bank that showed inflation expectations falling.

The November consumer price index figures later in the day follow Friday's forecast-beating print on wholesale inflation, which dented hopes the Fed could take a more dovish tilt in its monetary-tightening campaign.

The central bank is then widely expected to lift interest rates 50 basis points on Wednesday -- a slowdown from the previous four 75-point hikes -- but its post-meeting statement and comments from boss Jerome Powell will be closely followed.

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While the general view is that policymakers will stop increasing borrowing costs next year, there is debate about how high they will end and when they will start to come down.

"It's all going to depend on CPI numbers, whether the Fed is going to pivot or not," Xi Qiao, at UBS Group AG, told Bloomberg Television.

"With the current inflation situation, a lot of the fundamental challenges that we have right now are going to go into 2023."

But the Wall Street Journal reported that there were disagreements within the policy board about the way forward, with doves trying to limit the economic pain as they bring inflation down, while hawks want a tougher line on fighting prices by weakening the jobs market.

"In this light, don't expect clearcut signals from the Fed... on what they expect to be doing at early 2023 (policy) meetings after a widely expected 50 basis points fund rate hike this week," said National Australia Bank's Ray Attrill.

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In early Asian business, Hong Kong, Tokyo, Shanghai, Sydney, Seoul, Wellington, Taipei, Manila and Jakarta were all well up.

China's shift away from its economically damaging zero-Covid policy continued to lift sentiment as the world's number two economy opens up.

And on Monday, the country's ambassador to the United States said: "In the near future I believe that measures will be further relaxed and international travel will become easier."

Meanwhile, top Chinese officials are meeting this week to draw up their economic blueprint for re-emerging from Covid, with observers predicting more stimulus measures and pledges of support for the troubled property sector.

But there is also a worry among investors that the quick relaxation of containment measures such as mass testing and lockdowns might lead to a massive surge in infections that could overwhelm the healthcare system and weigh on the economy.

Still, the expected pick-up in demand in China boosted oil prices further, with both main contracts extending Monday's strong gains.

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"China's reopening is coming, it won't happen overnight, but it will provide a major boost to demand in the outlook next quarter," said OANDA's Edward Moya.

Key figures around 0230 GMT

Tokyo - Nikkei 225: UP 0.4 percent at 27,946.09 (break)

Hong Kong - Hang Seng Index: UP 0.6 percent at 19,585.54

Shanghai - Composite: UP 0.1 percent at 3,183.39

Euro/dollar: UP at $1.0547 from $1.0539 on Monday

Dollar/yen: UP at 137.75 yen from 137.66 yen

Pound/dollar: UP at $1.2276 from $1.2268

Euro/pound: UP at 85.92 pence from 85.87 pence

West Texas Intermediate: UP 0.9 percent at $73.82 per barrel

Brent North Sea crude: UP 0.9 percent at $78.67 per barrel

New York - Dow: UP 1.6 percent at 34,005.04 (close)

London - FTSE 100: DOWN 0.4 percent at 7,445.97 (close)

Source: AFP