Asian Markets Follow Wall Street’s Recovery, in Partial Comeback

HONG KONG — Asian markets followed Wall Street’s lead and rose on Wednesday, making up some — but not most — of the ground they gave up during a global sell-off the day before.

Markets in Japan, Hong Kong, Taiwan and South Korea were trading modestly higher by midday in Asia. Futures contracts that track stocks in the United States were only a bit lower, suggesting Wall Street’s wild ride may slow down after several dramatic days of dips and bumps.

The return of buyers to the world’s financial markets underscores the fact that investors generally believe the global economy is in good health, give or take a few problems.

Investors had grown skittish in recent days over the potential for inflation in the United States. Inflation could spur the Federal Reserve to raise interest rates faster than many had expected, essentially making it more expensive for people around the world to borrow and pay back loans in American dollars.

Those concerns eventually led to a drop on Monday of more than 4 percent in the Standard & Poor’s 500-stock index, a broad measure of the health of the American stock market.

But investors on Tuesday in the United States — followed by investors in Asia on Wednesday — showed a more positive overall view. Growth, wages and other measures of economic health in the United States remain healthy, giving investors reasons to start buying stocks again.

“As we look forward, the market drivers of better economic prospects and higher profits have not changed at all,” Steve M. Duryee, a portfolio manager at Morgan Stanley’s Bergman Continuum Group, a wealth management firm, said in an email to clients.

By many measures, Asia’s performance also remains strong. China’s economy has revved up again, while Japan’s economy has ticked up a notch. Improved economic performance around the world has sharpened the appetite for products made in Asia’s exporting factories.

Still, the global economy faces challenges, and investors signaled they were not ready to continue the stock run-up that had characterized global markets in recent months. Shares in Hong Kong and Japan were up only about 1 percent at midday on Wednesday, gains that failed to make up for the drops in excess of 4 percent they suffered on Tuesday.

The longer-term challenge for Asian economies will be whether higher interest rates in the United States would lead to a significantly broader tightening of credit. China in particular has turned to credit to keep its economic engine humming. While China’s tight control of its financial system makes it less vulnerable to headwinds from the outside, broadly tighter credit could still have an effect.

Still, if markets avoid sharp gyrations, borrowers should be confident enough to continue ladling on debt, Daiwa Capital Markets said in a note to investors.

“Within weeks or months,” it said, “the light for the party would be switched on again.”

Content originally published on https://www.nytimes.com/2018/02/07/business/dealbook/stock-market.html by CARLOS TEJADA