Asia Business

Global stocks sank Thursday as central banks hiked interest rates again and signalled they needed to go higher to fight inflation.

Both the Bank of England and the European Central Bank mirrored the Fed’s half-point hike on Wednesday to tackle soaring inflation, after rate increases in Norway and Switzerland.

Sentiment was hammered after the Fed suggested that it saw US rates topping out next year at 5.1 percent, higher than markets had predicted. 

Meanwhile the BoE, which lifted its key rate to the highest level in 14 years, warned that labour market tightness and inflationary pressures justified “a further forceful monetary policy response”.

The ECB delivered a similar message.

“Inflation remains far too high and is projected to stay above the target for too long,” it said.

ECB president Christine Lagarde warned “we should expect to raise interest rates at a 50 basis-point pace for a period of time”.

Market analyst Patrick O’Hare at Briefing.com said “these policy moves were expected, but that still hasn’t helped matters given the understanding that higher rates will inevitably weigh on economic activity.” 

Wall Street opened with deeper losses than it posted on Wednesday following the Fed’s hikes. The Dow dropped 1.0 percent at the start of trading. 

The S&P 500 fell 1.2 and tech-heavy Nasdaq Composite 1.4 percent.

– Fresh recession fears –

In Europe, London shed 0.6 percent, while Frankfurt and Paris tumbled 2.4 percent.

The Fed also warned that the world’s biggest economy would grow less than expected next year, fuelling fresh recession fears.

Data released Thursday showing retail sales sliding by 0.6 percent in November from October, as well a drop in industrial output, fanned those fears.  

The BoE and ECB also had downbeat messages about growth.

Rising rates fan recession concerns because they push up loan repayments for consumers and companies, denting expenditure, investment and economic activity.

At the same time, however, the world’s major central banks are seeking to dampen red-hot inflation, which has been fuelled partly by fallout from Russia’s invasion of Ukraine.

Recent official data painted a picture of slowing inflation in Britain and the United States, although consumer prices remain elevated.

“The interest rate hikes keep on coming and this trend is almost certainly going to remain intact in early 2023,” noted AJ Bell investment director Russ Mould.

“Raising rates makes it more expensive for consumers and businesses to borrow money and theoretically causes a reduction in spending and investment which should help to ease the economy and bring down prices.

“This takes time to work its way through the system and so central banks will continue their rate hiking path until there is adequate evidence to support a shift in policy.”

Markets had rallied earlier this week after data showed the US consumer price index rose less than forecast in November, marking a fifth straight slowdown and the lowest level since December last year.

But the Fed appeared less inclined to accept that the recent figures were enough to indicate enough progress was being made.

“Fifty basis points is still a historically large increase, and we still have some ways to go,” Fed boss Jerome Powell told reporters after the announcement.

Oil prices slid on fears recession would dent crude demand.

– Key figures around 1430 GMT –

London – FTSE 100: DOWN 0.6 percent at 7,451.03 points

Frankfurt – DAX: DOWN 2.4 percent at 14,112.11

Paris – CAC 40: DOWN 2.4 percent at 6,566.64

EURO STOXX 50: DOWN 2.6 percent at 3,872.25

New York – Dow: DOWN 1.0 percent at 33,624.24

Tokyo – Nikkei 225: DOWN 0.4 percent at 28,051.70 (close)

Hong Kong – Hang Seng Index: DOWN 1.6 percent at 19,368.59 (close)

Shanghai – Composite: DOWN 0.3 percent at 3,168.65 (close)

Euro/dollar: UP at $1.0707 from $1.0684 on Wednesday

Dollar/yen: UP at 136.51 yen from 135.45 yen

Pound/dollar: DOWN at $1.2321 from $1.2424

Euro/pound: UP at 86.91 pence from 85.96 pence

Brent North Sea crude: DOWN 0.5 percent at $82.25 per barrel

West Texas Intermediate: DOWN 0.6 percent at $76.79 per barrel

burs-rl/jj

Global stocks sank Thursday and the dollar rose after the US Federal Reserve hiked interest rates again and signalled they would go higher to fight inflation.

Markets were also on tenterhooks ahead of expected rate increases from the Bank of England and the European Central Bank.

Both are expected to mirror the Fed’s half-point hike to tackle soaring inflation, after rate increases also in Norway and Switzerland.

Sentiment was hammered Thursday after the Fed suggested that it saw US rates topping out next year at 5.1 percent, higher than markets had predicted.

“Equity markets are back in the red… as investors reel from the nasty shock delivered by the Fed and look ahead to central bank rate decisions on the agenda today,” said Oanda analyst Craig Erlam.

“The question now becomes whether other central banks will take a similarly hawkish position against the markets and ruin any hope of a Santa rally this year.”

The Fed also warned that the world’s biggest economy would grow less than expected next year, fuelling fresh recession fears.

Rising rates fan recession concerns because they push up loan repayments for consumers and companies, denting expenditure, investment and economic activity.

At the same time, however, the world’s major central banks are seeking to dampen red-hot inflation, which has been fuelled partly by fallout from Russia’s invasion of Ukraine.

Recent official data painted a picture of slowing inflation in Britain and the United States, although consumer prices remain elevated.

“The interest rate hikes keep on coming and this trend is almost certainly going to remain intact in early 2023,” noted AJ Bell investment director Russ Mould.

“Raising rates makes it more expensive for consumers and businesses to borrow money and theoretically causes a reduction in spending and investment which should help to ease the economy and bring down prices.

“This takes time to work its way through the system and so central banks will continue their rate hiking path until there is adequate evidence to support a shift in policy.”

Markets had rallied earlier this week after data showed the US consumer price index rose less than forecast in November, marking a fifth straight slowdown and the lowest level since December last year.

But the Fed appeared less inclined to accept that the recent figures were enough to indicate enough progress was being made.

“Fifty basis points is still a historically large increase, and we still have some ways to go,” Fed boss Jerome Powell told reporters after the announcement.

Oil prices rose on lingering concerns over slowing global energy demand, dealers said. 

– Key figures around 1120 GMT –

London – FTSE 100: DOWN 0.4 percent at 7,468.62 points

Frankfurt – DAX: DOWN 1.1 percent at 14,295.23

Paris – CAC 40: DOWN 1.1 percent at 6,655.77

EURO STOXX 50: DOWN 1.2 percent at 3,926.88

Tokyo – Nikkei 225: DOWN 0.4 percent at 28,051.70 (close)

Hong Kong – Hang Seng Index: DOWN 1.6 percent at 19,368.59 (close)

Shanghai – Composite: DOWN 0.3 percent at 3,168.65 (close)

New York – Dow: DOWN 0.4 percent at 33,966.35 (close)

Euro/dollar: DOWN at $1.0614 from $1.0684 on Wednesday

Dollar/yen: UP at 136.76 yen from 135.45 yen

Pound/dollar: DOWN at $1.2343 from $1.2424

Euro/pound: UP at 86.02 pence from 85.96 pence

Brent North Sea crude: UP 0.4 percent at $83.06 per barrel

West Texas Intermediate: UP 0.4 percent at $77.55 per barrel

burs/rfj/bcp/raz

Asian and European equities fell Thursday after the Federal Reserve signalled US interest rates would go higher than expected and warned the world’s biggest economy would grow less than expected next year, fanning fears a recession is on the way.

Traders took their lead from Wall Street, where a more hawkish statement than expected dented hopes the central bank could soften its approach to fighting inflation.

Markets had rallied after data on Tuesday showed the consumer price index rose less than forecast in November, marking a fifth straight slowdown and the lowest level since December last year.

But the Fed appeared less inclined to accept that the recent figures were enough to indicate enough progress was being made.

While it lifted rates by the expected 50 basis points — down from the previous four 75-point hikes — its “dot plot” of forecasts suggested it saw them top out next year at 5.1 percent, higher than markets had predicted.

“Fifty basis points is still a historically large increase, and we still have some ways to go,” Fed boss Jerome Powell told reporters after the announcement.

He added that he “wouldn’t see us considering” any cuts until officials were happy that inflation was on track to its two percent target.

“It will take substantially more evidence to give confidence that inflation is on a sustained downward path,” he said.

The Fed also cut its expectations for growth next year as it faced headwinds from the tighter monetary policies, stirring fresh warnings of a recession, which have weighed on equities for much of the year.

But Powell said: “I don’t think anyone knows whether we’re going to have a recession or not, and if we do, whether it’s going to be a deep one or not.”

– ‘Worried about a recession’ –

After Wall Street’s retreat, Asia fell into the red, with Hong Kong, Shanghai, Bangkok, Mumbai, Tokyo, Sydney, Seoul, Taipei, Manila and Jakarta all down.

London, Paris and Frankfurt all opened on the back foot.

The dollar rose against most other currencies, even the euro and pound ahead of expected rate hikes by the European and UK central banks later Thursday.

“The Fed did not welcome the disinflation trends that have just started to emerge and focused on robust job gains and elevated inflation,” said OANDA’s Edward Moya.

“Any hopes of a soft landing disappeared as the Fed seems like they are committed to taking rates much higher.”

Despite the tougher talk from the Fed, Tomo Kinoshita at Invesco Asset Management said: “US shares have seen limited falls, indicating that financial markets are not wholeheartedly believing in that hawkishness, perhaps because some Fed policymakers have talked about the possibility of rate cuts already.”

But he added: “Long-term bond yields appeared to have peaked out, which is a sign investors are now worried about a recession.”

The likelihood of rates going even higher outweighed hopes about China’s emergence from nearly three years of strict zero-Covid containment measures that have crippled its economy.

While the reopening is expected to provide a much-needed boost to growth, there is an immediate worry about the impact of soaring infection numbers on the healthcare system and firms’ ability to function.

And in a sign of the effect of the anti-Covid strategy, data on Thursday showed retail sales fell more than expected in November, industrial output growth slowed and investment weakened.

And analysts warned there would not likely be any improvement this month.

Oil prices sank after a three-day rally on news that a section of the US Keystone pipeline had been repaired after suffering a leak earlier in the week. 

– Key figures around 0820 GMT –

Tokyo – Nikkei 225: DOWN 0.4 percent at 28,051.70 (close)

Hong Kong – Hang Seng Index: DOWN 1.6 percent at 19,368.59 (close)

Shanghai – Composite: DOWN 0.3 percent at 3,168.65 (close)

London – FTSE 100: DOWN 0.5 percent at 7,457.73

Euro/dollar: DOWN at $1.0645 from $1.0684 on Wednesday

Dollar/yen: UP at 135.78 yen from 135.45 yen

Pound/dollar: DOWN at $1.2378 from $1.2424

Euro/pound: UP at 85.99 pence from 85.96 pence

West Texas Intermediate: DOWN 1.1 percent at $76.43 per barrel

Brent North Sea crude: DOWN 0.9 percent at $81.95 per barrel

New York – Dow: DOWN 0.4 percent at 33,966.35 (close)

Asian equities fell Thursday after the Federal Reserve signalled US interest rates would go higher than expected and warned the world’s biggest economy would grow less than expected next year, fanning fears a recession is on the way.

Traders took their lead from Wall Street, where a more hawkish statement than expected dented hopes the central bank could soften its approach to fighting inflation.

Markets had rallied after data on Tuesday showed the consumer price index rose less than forecast in November, marking a fifth straight slowdown and the lowest level since December last year.

But the Fed appeared less inclined to accept that the recent figures were enough to indicate enough progress was being made.

While it lifted rates by the expected 50 basis points — down from the previous four 75-point hikes — its “dot plot” of forecasts suggested it saw them top out next year at 5.1 percent, higher than markets had predicted.

“Fifty basis points is still a historically large increase, and we still have some ways to go,” Fed boss Jerome Powell told reporters after the announcement.

He added that he “wouldn’t see us considering” any cuts until officials were happy that inflation was on track to its two percent target.

“It will take substantially more evidence to give confidence that inflation is on a sustained downward path,” he said.

The Fed also cut its expectations for growth next year as it faced headwinds from the tighter monetary policies, stirring fresh warnings of a recession, which have weighed on equities for much of the year.

But Powell said: “I don’t think anyone knows whether we’re going to have a recession or not, and if we do, whether it’s going to be a deep one or not.”

– ‘Worried about a recession’ –

After Wall Street’s retreat, Asia fell into the red, with Hong Kong, Shanghai, Tokyo, Sydney, Seoul, Taipei, Manila and Jakarta all down.

“The Fed did not welcome the disinflation trends that have just started to emerge and focused on robust job gains and elevated inflation,” said OANDA’s Edward Moya.

“Any hopes of a soft landing disappeared as the Fed seems like they are committed to taking rates much higher.”

Despite the tougher talk from the Fed, Tomo Kinoshita at Invesco Asset Management said: “US shares have seen limited falls, indicating that financial markets are not wholeheartedly believing in that hawkishness, perhaps because some Fed policymakers have talked about the possibility of rate cuts already.”

But he added: “Long-term bond yields appeared to have peaked out, which is a sign investors are now worried about a recession.”

The likelihood of rates going even higher outweighed hopes about China’s emergence from nearly three years of strict zero-Covid containment measures that have crippled its economy.

While the reopening is expected to provide a much-needed boost to growth, there is an immediate worry about the impact of soaring infection numbers on the healthcare system and firms’ ability to function.

And in a sign of the effect of the anti-Covid strategy, data on Thursday showed retail sales fell more than expected in November, industrial output growth slowed and investment weakened.

And analysts warned there would not likely be any improvement this month.

– Key figures around 0300 GMT –

Tokyo – Nikkei 225: DOWN 0.3 percent at 28,081.55 (break)

Hong Kong – Hang Seng Index: DOWN 1.9 percent at 19,309.24

Shanghai – Composite: DOWN 0.3 percent at 3,166.04

Euro/dollar: DOWN at $1.0655 from $1.0684 on Wednesday

Dollar/yen: UP at 135.57 yen from 135.45 yen

Pound/dollar: DOWN at $1.2392 from $1.2424

Euro/pound: UP at 85.98 pence from 85.96 pence

West Texas Intermediate: DOWN 0.8 percent at $76.66 per barrel

Brent North Sea crude: DOWN 0.7 percent at $82.17 per barrel

New York – Dow: DOWN 0.4 percent at 33,966.35 (close)

London – FTSE 100: DOWN 0.1 percent at 7,495.93 (close)

The EU vowed billions of dollars of investment in southeast Asia Wednesday, as leaders looked to bolster ties at a summit in the face of the Ukraine war and challenges from China. 

The European Union billed its first full summit with the Association of Southeast Asian Nations (ASEAN) in Brussels as a chance to push trade relations with the region’s fast-growing economies. 

“There might be many, many miles that divide us, but there are much more values that unite us,” European Commission President Ursula von der Leyen told the gathered leaders.

But different opinions over Russia’s war in Ukraine and concerns about tensions with China over a key shipping route for global trade loomed over the meeting. 

The EU has been on a diplomatic push to galvanise a global front against Moscow as its invasion has sent economic and political shock waves around the world. 

ASEAN’s 10 nations — nine of which were represented, after Myanmar’s junta was not invited — have been divided in their response to the Kremlin’s war on Ukraine.

Singapore has gone along with Western sanctions on Russia, while Vietnam and Laos, which have close military ties to Moscow, have remained more neutral. 

Along with Thailand, they abstained from a United Nations vote in October condemning Russia’s attempted annexation of regions of Ukraine seized since February.    

The diverging views led to intense wrangling over a declaration from the summit as the EU pushed for stronger language to condemn Moscow.

The final statement said “most members” decried Russia’s war, but conceded there were also “other views and different assessments”. 

  

– China looms –

While Europe pressed for a tougher response to Russia, another global giant figured prominently at the summit. 

Chinese claims over the South China Sea have set it against some neighbours and sparked fears in Europe over trade flows through the key global thoroughfare. 

But China remains the biggest trade partner for ASEAN and many in the region are wary of distancing themselves from their giant neighbour.

The EU is keen to pitch itself as a reliable partner for southeast Asia’s dynamic economies amid the growing rivalry between Beijing and Washington. 

The EU and ASEAN are each other’s third-largest trading partner and Europe sees the region as a key source for raw materials and wants to increase access to its booming markets.

EU nations are pushing to diversify key supply chains away from China as the war in Ukraine has highlighted Europe’s vulnerabilities. 

Von der Leyen offered an investment package over the next five years worth 10 billion euros ($10.6 billion) under the EU’s Global Gateway strategy designed as a counterweight to China’s largesse.

But ASEAN leaders insisted they would not be forced to make a choice between the global players competing for influence.  

“We absolutely refuse to go back to the situation of the Cold War where we have to pick sides in terms of who the superpower is that we are aligned with,” said Filipino President Ferdinand Marcos Jr.

– Sex law furore –

ASEAN and the EU suspended their push for a joint trade deal over a decade ago — but the bloc’s top officials said they hoped to relaunch efforts for a broad agreement. 

So far deals with Vietnam and Singapore are in place, and the EU is looking now to make progress with ASEAN’s largest economy Indonesia and to resume talks with Malaysia, Philippines and Thailand.

One issue that had risked clouding discussions was a new law in Indonesia criminalising sex outside marriage that has sparked fears for foreign visitors to the country.

But Indonesia’s President Joko Widodo pointedly insisted that the EU-ASEAN relationship needed to be based more on “equality”. 

“There must be no imposition of views,” he said. “There must not be one who dictates over the other and thinks that my standard is better than yours.”

Caution reigned on stock markets on Wednesday ahead of an expected interest rate hike from the Federal Reserve as inflation remains at decade-high levels despite moderate slowdowns. 

Wall Street’s main indices posted modest gains in morning trading, with the Dow adding 0.7 percent.

European stocks finished moderately lower, with London losses cushioned by news that UK inflation nudged lower in November.

Meanwhile, Frankfurt and Paris also fell despite the Ifo research institute’s forecast that Germany’s recession could be milder than previously predicted.

Asian stocks rose following Tuesday’s rebound on Wall Street.

The dollar drifted lower against its main rival currencies.

The Fed is forecast to increase borrowing costs 50 basis points Wednesday after four 75-point rises in a row.

The US central bank has embarked on an all-out campaign to cool demand in the world’s biggest economy, raising rates six times this year with interest-sensitive sectors like housing already reeling from tightening policy.

The US central bank’s post-meeting statement and boss Jerome Powell’s comments are the main focus for traders, along with the Fed’s infamous “dot plot” chart of the rate outlook.

“At the end of the day, it’s Jerome Powell, and the Fed, who will either give a green light for a modest Santa rally (for equities), or tell investors that Santa is stuck in a snow storm this year,” noted SwissQuote analyst Ipek Ozkardeskaya.

Investors will be looking for indications on the pace of future rate hikes, as well as what could be the “terminal rate”, or the highest interest rate before the Fed begins lowering rates again.

Briefing.com analyst Patrick O’Hare said the “tone and cadence from Fed Chair Powell will have an outsized impact today” on markets as official forecasts are subject to revision.

Later, the impact of higher interest rates on consumers and the wider economy will feed into investors’ calculations.

“That reality will be an inevitable drag on economic activity and it will be incorporated in the market’s concerns about the long and variable lags of monetary policy on economic activity,” he added.

It’s the turn of Europe on Thursday, with the Bank of England and European Central Bank expected to announce less aggressive rate hikes compared with their recent monetary policy decisions.

Wall Street rebounded Tuesday in reaction to data showing US consumer prices rose 7.1 percent last month, less than forecast and the slowest pace since December 2021.

The reading followed an October slowdown and fuelled hopes that inflation in the world’s biggest economy has finally peaked, after several months of Fed rate hikes.

Markets are also eyeing developments in China, which is continuing to roll back its strict zero-Covid strategy that has battered the world’s number two economy, though fears of a sharp surge in infections are causing some unease among dealers.

Oil prices pushed higher.

“Crude oil prices have continued their recent rise after the IEA warned that prices were likely to rise next year as sanctions further squeeze Russian supply, and demand starts to pick up as China starts to reopen properly,” said market analyst Michael Hewson at CMC Markets.

– Key figures around 1630 GMT –

New York – Dow: UP 0.7 percent at 34,350.80 points

EURO STOXX 50: DOWN 0.3 percent at 3,975.26

London – FTSE 100: DOWN less than 0.1 percent at 7,495.93 (close)

Frankfurt – DAX: DOWN 0.3 percent at 14,460.20 (close)

Paris – CAC 40: DOWN 0.2 percent at 6,730.79 (close)

Tokyo – Nikkei 225: UP 0.7 percent at 28,156.21 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,673.45 (close)

Shanghai – Composite: FLAT at 3,176.53 (close)

Euro/dollar: UP at $1.0660 from $1.0635 on Tuesday

Dollar/yen: DOWN at 134.76 yen from 135.59 yen

Pound/dollar: UP at $1.2421 from $1.2366

Euro/pound: DOWN at 85.83 pence from 85.96 pence

Brent North Sea crude: UP 2.5 percent at $82.72 per barrel

West Texas Intermediate: UP 2.6 percent at $77.36 per barrel

burs-rl/lc

Caution reigned on stock markets on Wednesday ahead of an expected interest rate hike from the Federal Reserve as inflation remains at decade-high levels despite moderate slowdowns. 

Wall Street opened mixed, with the Dow adding 0.2 percent.

European stocks were moderately lower in afternoon trade, with London losses cushioned by news that UK inflation nudged lower in November.

Meanwhile, Frankfurt and Paris also fell despite the Ifo research institute’s forecast that Germany’s recession could be milder than previously predicted.

Asian stocks rose following Tuesday’s rebound on Wall Street.

The dollar drifted lower against its main rival currencies.

The Fed is forecast to increase borrowing costs 50 basis points Wednesday after four 75-point rises in a row.

The US central bank’s post-meeting statement and boss Jerome Powell’s comments are the main focus for traders, along with the Fed’s infamous “dot plot” chart of the rate outlook.

“At the end of the day, it’s Jerome Powell, and the Fed, who will either give a green light for a modest Santa rally (for equities), or tell investors that Santa is stuck in a snow storm this year,” noted SwissQuote analyst Ipek Ozkardeskaya.

Investors will be looking for indications on the pace of future rate hikes, as well as what could be the “terminal rate”, or the highest interest rate before the Fed begins lowering rates again.

Briefing.com analyst Patrick O’Hare said the “tone and cadence from Fed Chair Powell will have an outsized impact today” on markets as official forecasts are subject to revision.

Later, the impact of higher interest rates on consumers and the wider economy will feed into investors’ calculations.

“That reality will be an inevitable drag on economic activity and it will be incorporated in the market’s concerns about the long and variable lags of monetary policy on economic activity,” he added.

It’s the turn of Europe on Thursday, with the Bank of England and European Central Bank expected to announce less aggressive rate hikes compared with their recent monetary policy decisions.

Wall Street rebounded Tuesday in reaction to data showing US consumer prices rose 7.1 percent last month, less than forecast and the slowest pace since December 2021.

The reading followed an October slowdown and fuelled hopes that inflation in the world’s biggest economy has finally peaked, after several months of Fed rate hikes.

Markets are also eyeing developments in China, which is continuing to roll back its strict zero-Covid strategy that has battered the world’s number two economy, though fears of a sharp surge in infections are causing some unease among dealers.

Oil extended recent gains as traders awaited the weekly US inventories report for clues on demand in the world’s top crude consuming nation.

– Key figures around 1430 GMT –

London – FTSE 100: DOWN less than 0.1 percent at 7,498.46 points

Frankfurt – DAX: DOWN 0.5 percent at 14,424.85

Paris – CAC 40: DOWN 0.3 percent at 6,723.43

EURO STOXX 50: DOWN 0.4 percent at 3,972.18

New York – Dow: UP 0.2 percent at 34,165.75

Tokyo – Nikkei 225: UP 0.7 percent at 28,156.21 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,673.45 (close)

Shanghai – Composite: FLAT at 3,176.53 (close)

Euro/dollar: UP at $1.0641 from $1.0635 on Tuesday

Dollar/yen: DOWN at 134.98 yen from 135.59 yen

Pound/dollar: UP at $1.2367 from $1.2366

Euro/pound: UP at 86.03 pence from 85.96 pence

Brent North Sea crude: UP 1.6 percent at $81.98 per barrel

West Texas Intermediate: UP 1.8 percent at $76.78 per barrel

burs-rl/lc

The EU vowed billions of dollars of investment in southeast Asia Wednesday, as leaders looked to bolster ties at a summit in the face of the Ukraine war and challenges from China. 

The European Union billed its first full summit with the Association of Southeast Asian Nations (ASEAN) in Brussels as a chance to push trade relations with the region’s fast-growing economies. 

“There might be many, many miles that divide us, but there are much more values that unite us,” European Commission President Ursula von der Leyen told the gathered leaders.

But different opinions over Russia’s war in Ukraine and concerns about tensions with China over a key shipping route for global trade loomed over the meeting. 

The EU has been on a diplomatic push to galvanise a global front against Moscow as its invasion has sent economic and political shock waves around the world. 

ASEAN’s 10 nations — nine of which were represented, after Myanmar’s junta was not invited — have been divided in their response to the Kremlin’s war on Ukraine.

Singapore has gone along with Western sanctions on Russia, while Vietnam and Laos, which have close military ties to Moscow, have remained more neutral. 

Along with Thailand, they abstained from a United Nations vote in October condemning Russia’s attempted annexation of regions of Ukraine seized since February.    

The diverging views led to intense wrangling over a final declaration from the summit as the EU pushed for stronger language to condemn Moscow.

A draft of the final statement said “most members” decried Russia’s war, but conceded there were also “other views and different assessments”. 

– China looms –

While Europe pressed for a tougher response to Russia, another global giant figured prominently at the summit. 

Chinese claims over the South China Sea have set it against some neighbours and sparked fears in Europe over trade flows through the key global thoroughfare. 

But China remains the biggest trade partner for ASEAN and many in the region are wary of distancing themselves from their giant neighbour.

The EU is keen to pitch itself as a reliable partner for southeast Asia’s dynamic economies amid the growing rivalry between Beijing and Washington. 

The EU and ASEAN are each other’s third-largest trading partner and Europe sees the region as a key source for raw materials and wants to increase access to its booming markets.

EU nations are pushing to diversify key supply chains away from China as the war in Ukraine has highlighted Europe’s vulnerabilities. 

Von der Leyen offered an investment package over the next five years worth 10 billion euros ($10.6 billion) under the EU’s Global Gateway strategy designed as a counterweight to China’s largesse.

“There is a battle of offers today in the geopolitical arena, not only a battle of narrative,” said EU foreign policy chief Josep Borrell. “We have to offer more.”

– Sex law furore –

ASEAN and the EU suspended their push for a joint trade deal over a decade ago — but the bloc’s top officials said they hoped to relaunch efforts for a broad agreement. 

So far deals with Vietnam and Singapore are in place, and the EU is looking now to make progress with ASEAN’s largest economy Indonesia and to resume talks with Malaysia, Philippines and Thailand.

One issue that risked clouding discussions was a new law in Indonesia criminalising sex outside marriage that has sparked fears for foreign visitors to country.

Indonesia’s President Joko Widodo insisted though that the EU-ASEAN relationship needed to be based more on “equality”. 

“There must be no imposition of views,” he said.  

“There must not be one who dictates over the other and thinks that my standard is better than yours.”

Global stock markets diverged Wednesday, with Asia rising and Europe falling before an expected interest rate hike from the Federal Reserve, with inflation around the highest levels in decades despite moderate slowdowns.

London losses nearing the half-way mark were cushioned by news that UK inflation nudged lower in November.

Frankfurt and Paris also fell despite the Ifo research institute’s forecast that Germany’s recession could be milder than previously predicted.

Asian indices closed higher following Tuesday’s softer-than-expected US inflation data that could allow the Federal Reserve to slow its pace of interest rate hikes.

The Fed is forecast to increase borrowing costs 50 basis points Wednesday after four 75-point rises in a row.

The US central bank’s post-meeting statement and boss Jerome Powell’s comments are the main focus for traders, along with the Fed’s infamous “dot plot” chart of the rate outlook.

“At the end of the day, it’s Jerome Powell, and the Fed, who will either give a green light for a modest Santa rally (for equities), or tell investors that Santa is stuck in a snow storm this year,” noted SwissQuote analyst Ipek Ozkardeskaya.

It’s the turn of Europe on Thursday, with the Bank of England and European Central Bank expected to announce less aggressive rate hikes compared with their recent monetary policy decisions.

Wall Street rebounded Tuesday in reaction to data showing US consumer prices rose 7.1 percent last month, less than forecast and the slowest pace since December 2021.

The reading followed an October slowdown and fuelled hopes that inflation in the world’s biggest economy has finally peaked, after several months of Fed rate hikes.

Markets are also eyeing developments in China, which is continuing to roll back its strict zero-Covid strategy that has battered the world’s number two economy, though fears of a sharp surge in infections are causing some unease among dealers.

Oil extended recent gains as traders awaited the weekly US inventories report for clues on demand in the world’s top crude consuming nation.

– Key figures around 1200 GMT –

London – FTSE 100: DOWN 0.3 percent at 7,479.69 points

Frankfurt – DAX: DOWN 0.7 percent at 14,391.94

Paris – CAC 40: DOWN 0.6 percent at 6,702.55

EURO STOXX 50: DOWN 0.8 percent at 3,956.14

Tokyo – Nikkei 225: UP 0.7 percent at 28,156.21 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,673.45 (close)

Shanghai – Composite: FLAT at 3,176.53 (close)

New York – Dow: UP 0.3 percent at 34,108.64 (close)

Euro/dollar: UP at $1.0653 from $1.0635 on Tuesday

Dollar/yen: DOWN at 134.96 yen from 135.59 yen

Pound/dollar: UP at $1.2377 from $1.2366

Euro/pound: UP at 86.04 pence from 85.96 pence

Brent North Sea crude: UP 0.9 percent at $81.40 per barrel

West Texas Intermediate: UP 1.0 percent at $76.15 per barrel

Asian markets rose Wednesday and the dollar struggled to recover as investors welcomed softer-than-expected US inflation data that could allow the Federal Reserve to slow down its pace of interest rate hikes.

The reading provided some much-needed Christmas cheer on trading floors and came the day before the US central bank’s last policy decision of the year, which will be pored over for clues about its plans for 2023.

There is also some focus on China as it continues to roll back its strict zero-Covid strategy that has battered the world’s number two economy, though fears of a sharp surge in infections are causing some unease among dealers.

All three main indexes on Wall Street ended in positive territory Tuesday in reaction to data showing consumer prices rose 7.1 percent last month, less than forecast and the slowest pace since December 2021.

The reading followed an October slowdown and fuelled hopes that inflation has finally peaked, after several months of Fed rate hikes.

It “came with the caveat that it was ‘just one month of data’ but the November numbers add further weight to the interpretation that the long-awaited goods disinflation is showing up in the data,” said National Australia Bank’s Taylor Nugent.

Asian markets tracked Wall Street higher, though the gains were limited ahead of the Fed meeting with traders accepting that seven percent inflation was still very high.

Hong Kong, Tokyo, Sydney, Seoul, Singapore, Mumbai, Taipei, Manila and Bangkok all rose, while Shanghai was flat though Wellington and Jakarta dipped.

And the dollar moved only slightly after Tuesday’s retreat that came in reaction to the inflation report, with the yen, euro and pound the main beneficiaries.

London dipped as data showed UK inflation had also slowed in November, though it still remained elevated at 10.7 percent.

Paris and Frankfurt also fell.

While the Fed is widely expected to increase borrowing costs by 50 basis points Wednesday — after four successive 75-point hikes — its post-meeting statement and boss Jerome Powell’s comments are the main focus for traders.

And while the slower inflation print was welcomed, there is still concern that the US economy will tip into recession next year as rates will remain elevated until prices are brought under control and within the bank’s target of around two percent.

Silvia Dall’Angelo, at Federated Hermes, said policymakers would slow the pace of hikes so they could “assess the impact on the real economy from the large cumulative tightening that has taken place since March.

“However, the Fed will stress that it is still far from mission accomplished with respect to its fight (against) high inflation, and more hikes will follow in coming months,” she added.

“Our expectation is that while inflation will decline over 2023, it will remain above target, which will prevent the Fed from easing next year.”

Oil prices edged down slightly after rallying on the back of the weaker dollar, though Brent held above $80.

– Key figures around 0820 GMT –

Tokyo – Nikkei 225: UP 0.7 percent at 28,156.21 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,673.45 (close)

Shanghai – Composite: FLAT at 3,176.53 (close)

London – FTSE 100: DOWN 0.3 percent at 7,481.69

Euro/dollar: DOWN at $1.0630 from $1.0635 on Tuesday

Dollar/yen: DOWN at 135.53 yen from 135.59 yen

Pound/dollar: DOWN at $1.2361 from $1.2366

Euro/pound: UP at 86.00 pence from 85.96 pence

West Texas Intermediate: DOWN 0.1 percent at $75.33 per barrel

Brent North Sea crude: DOWN 0.1 percent at $80.60 per barrel

New York – Dow: UP 0.3 percent at 34,108.64 (close)