Asian shares rise from two-year lows

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.8%, falling to its lowest after July 2020 the day before. Japan’s Nikkei gained 0.3%.

European markets also were selected to open higher, with EURO STOXX 50 futures up 0.7%. Nasdaq futures counted 0.8% and S&P 500 futures gained 0.4%.

Chinese blue chips directed Asia’s gains, increasing 2%, helped by Shanghai officials saying half the city had reached “zero COVID” status and U.S. President Joe Biden saying he was thinking of eliminating Trump-era tariffs on China to lower the prices of goods in the United States.

But, the main factor for markets right now is inflation, said Carlos Casanova, senior Asia economist at UBP.

Consumer price data indicating rates

Chinese data published earlier on Wednesday showed consumer prices gained 2.1% from a year earlier, exceeding expectations and at the fastest pace in five months, partly due to food prices.

Factory-gate inflation, while also exceeding expectations, eased to a one-year low.

U.S. consumer price data, at 1230 GMT, could suggest whether the Fed will raise rates even more aggressively to combat inflation.

The Fed last week increased its target for overnight bank-to-bank lending by a half a percentage point, and Chair Jerome Powell expressed two more such hikes are likely at the U.S. central bank’s coming policy meetings.

There has also been conjecture that the Fed will need to go in for a massive 75 basis point hike at one meeting.

Bold tightening has sent U.S. Treasury yields higher and supported the dollar.