Asian Markets Follow Wall Street Higher As Recession Fears Ease

Asian stock markets followed Wall Street higher on Friday after two Federal Reserve officials said the US economy might avoid a recession and news reports said China might boost construction spending to stimulate its struggling economy.

Shanghai, Tokyo, Hong Kong and Sydney advanced for a second day. Oil prices declined but stayed above $100 per barrel.

Wall Street's benchmark S and P 500 index rose 1.5 per cent on Thursday after a member of the Fed panel that sets interest rates, James Bullard, said a “soft landing” for the economy still was his “base case”.

Another member of the Fed panel, Christopher Waller, said “fears of a recession are overblown”.

“Investor recession fears ebbed,” said Robert Carnell and Iris Pang of ING in a report.

The Shanghai Composite Index advanced 0.2 per cent to 3,370.85 after news reports said China might add 1.5 trillion yuan ($220 billion) to spending on public works construction this year to stimulate economic growth.

The Nikkei 225 in Tokyo gained 1.4 per cent to 26,869.82 and the Hang Seng in Hong Kong added 0.5 per cent to 21,757.04.

The Kospi in Seoul rose 0.7 per cent to 2,350.97 and Sydney's S and P-ASX 200 was 0.5 per cent higher at 6,680.10. New Zealand and Southeast Asian markets advanced.

On Wall Street, the S and P 500 rose to 3,902.62 for its fourth daily increase. Roughly three-fourths of the stocks in the index gained.

The Dow Jones Industrial Average rose 1.1 per cent to 31,384 and the Nasdaq composite advanced 2.3 per cent to 11,621.35.

Investors are uneasy that aggressive US and European interest rate hikes to cool inflation that is running at a four-decade high might derail global economic growth.

Bullard, who is president of the Federal Reserve Bank of St. Louis, said “it would make a lot of sense” to raise the US central bank's key interest rate by three-quarters of a percentage point, or triple the usual margin, at its meeting this month.

That would repeat the dramatic mid-June rate hike, the Fed's biggest in 28 years.

Waller, speaking at a separate event, said he also supported a 0.75-percentage-point hike. He said the Fed might risk "causing some economic damage”, but with a strong labor market, that shouldn't be too big.

The US government is due to report in June employment data.

On Thursday, official data showed the number of Americans applying for unemployment benefits topped the 230,000 mark for the fifth consecutive week. It was the highest level in almost six months.

Bloomberg News reported China's Ministry of Finance was considering a plan to allow local governments to raise money from bond sales to spend on building roads and other public works.

It wasn't clear whether that represented additional spending or was future plans for bond sales brought forward to help shore up economic growth some forecasters say fell close to zero in the quarter ending in June after anti-virus controls shut down Shanghai and other industrial centres.

Markets also have been on edge about Russia's invasion of Ukraine, which sent oil and other commodity prices soaring.

European markets gained on Thursday after British Prime Minister Boris Johnson announced his resignation following a series of departures from his Cabinet by members of his Conservative Party.

In energy markets, benchmark US crude lost 11 cents to $102.62 per barrel in electronic trading on the New York Mercantile Exchange.

The contract rose $4.20 to $102.73 on Thursday. Brent crude, the price basis for international trading, shed 12 cents to $104.53 per barrel in London. It gained $3.96 the previous session to $104.65.

The dollar declined to 135.80 yen from Thursday's 136.11 yen. The euro gained to $1.0170 from $1.0156.