Asia report: Stocks rise as RBA hikes inflation forecast

Stock markets closed higher in Asia on Friday, as investors brushed off ongoing military drills being carried out by China in an apparent response to US House Speaker Nancy Pelosi’s visit to Taiwan earlier in the week.

In Japan, the Nikkei 225 was up 0.87% at 28,175.87, as the yen weakened 0.16% against the dollar to last trade at JPY 133.10.

Automation specialist Fanuc was ahead 1.13%, fashion firm Fast Retailing added 1.32%, and technology conglomerate SoftBank Group was 0.23% higher.

The broader Topix index was 0.85% firmer by the end of trading in Tokyo, settling at 1,947.17.

On the mainland, the Shanghai Composite was 1.19% firmer at 3,227.03, and the technology-heavy Shenzhen Component was ahead 1.69% at 12,269.21.

South Korea’s Kospi rose 0.72% to 2,490.80, while the Hang Seng Index in Hong Kong managed gains of 0.14% to 20,201.94.

Chinese technology giant Alibaba Group closed down 2.21% after the company reported flat revenue, but beat expectations on first quarter earnings.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics closing flat, while SK Hynix advanced 1.03%.

Oil prices were lower as the region entered the weekend, with Brent crude futures last down 0.04% on ICE at $94.08 per barrel, and West Texas Intermediate off 0.08% at $88.47 on NYMEX.

In Australia, the S&P/ASX 200 advanced 0.58% to 7,015.60, after the country’s central bank hiked its inflation forecasts and slashed its outlook for the country’s economy.

In its quarterly monetary policy statement, the Reserve Bank of Australia lifted its expected peak for headline inflation to 7.75%, from the 5.9% it had pencilled in back in May.

The bank said it was now not expecting inflation to return to its target range of 2% to 3% until the end of 2024.

At the same time, the RBA took the secateurs to its economic outlook, taking a full percentage point off its economic growth forecast for this year to 3.25%, and taking 25 basis points off 2023 and 2024’s expectations to 1.75%.

“A higher cost of living, rising interest rates and declining house prices are expected to weigh on growth and spending,” said Reserve Bank governor Philip Lowe.

“The board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a pre-set path.”

Australia’s cash rate has risen in the RBA’s last four monthly decisions, taking it from a pandemic-induced emergency low of 0.1% to its current 1.85%, with markets predicting a rate of 3% by the end of the year.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was the region’s odd one out, slipping 0.06% to 11,728.47 as investors started to close their wallets ahead of earnings season in Wellington.

The down under dollars were both weaker against the greenback, with the Aussie last off 0.29% at AUD 1.4387, and the Kiwi retreating 0.18% to NZD 1.5897.

Reporting by Josh White at Sharecast.com.