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Asia Stocks Buoyed by Fed Signals But China Data Weighs

Asian shares were lifted by positive messages from the US Fed, dismissing fears of more hefty rate rate hikes, but growth worries weighed on the mood in Hong Kong


Asian stock markets
Tokyo's key Nikkei 225 index closed down 2.53% on Monday. Reuters file photo.

 

China stocks edged ahead after a three-day break but the mood remained downbeat with more data showing economic activity in the world’s No-2 economy shrunk last month.

Both official and private surveys revealed China’s services and factory activities contracted at a steeper pace in April amid escalating Covid lockdowns, raising fears of a sharp economic slowdown in the second quarter that will weigh on global growth.

Elsewhere across the region traders were buoyed by the US Federal Reserve playing down the chances of a huge interest rate hike in the near future.

That came after US central bank officials announced an expected half-point lift in borrowing costs – the biggest since 2000 – as part of its battle to rein in inflation, while unveiling a timetable to offload its vast bond holdings.

 

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China’s central bank had on Wednesday pledged monetary policy support to help businesses badly hit by the latest Covid outbreak in the country, and support a recovery in consumption.

The pledge came as Beijing shut scores of metro stations and bus routes and extended curbs on many public venues, focusing efforts to avoid the fate of Shanghai, where millions have been under strict lockdown for more than a month.

“We still believe markets should remain focused on the development of the pandemic and the corresponding zero-Covid strategy,” Nomura said in a note.

Hong Kong stocks closed in negative territory though as traders were unable to maintain an early rally, weighed by fears over China’s economy.

The Hang Seng Index eased 0.36%, or 76.12 points, to 20,793.40. The Shanghai Composite Index added 0.68%, or 20.70 points, to 3,067.76, while the Shenzhen Composite Index on China’s second exchange also gained 0.68%, or 12.78 points, to 1,891.66.

China’s CSI Computer Index dropped 1.5%, led by a 10% slump in Hangzhou Hikvision Digital Technology Co, following the Financial Times report that the United States is moving towards imposing new sanctions on the Chinese video surveillance company.

CATL plunged more than 8% after the world’s largest electric vehicle EV battery manufacturer reported a 23.6% drop in first-quarter profit.

 

India’s Nifty 50 Edges Ahead

Gains in New York filtered through to other parts of Asia, where Sydney, Taipei, Manila, Bangkok and Wellington rose. However, Singapore dipped after giving up early gains. 

Indian stocks were on the up too with Mumbai’s signature Nifty 50 index up 0.17%, or 28.25 points, at 16,705.85. London, Paris and Frankfurt were all up in the morning.

Globally, equity markets were on the charge relieved that the biggest hike in US interest rates in more than two decades hadn’t been even sharper.

Wall Street bulls had seen the Dow Jones Industrial Average jump 2.8%, the S&P 500 gain 3% and Nasdaq finish 3.1% higher and futures prices pointed to little giveback expected later.

MSCI’s broadest index of Asia-Pacific shares outside Japan had risen 0.8% earlier, although trading had been thin with both Japanese and Korean markets closed for public holidays.

Marcella Chow, Hong Kong-based global market strategist at JP Morgan Asset Management, said the Federal Reserve’s rate rise was in line with expectations, hence removing some investor concerns about a more aggressive move.

“Given the Asian market has more certainty right now, I think this will probably also cause the market to rally a bit as well,” Chow said.

In currency markets, the dollar was gradually regaining its footing after the Fed’s move had caused its biggest drop in nearly two months. It is up more than 7% so far this year, on track for its biggest annual gains since 2015.

 

Key figures at around 0810 GMT

Hong Kong – Hang Seng Index > DOWN 0.4% at 20,793.40 (close)

Shanghai – Composite > UP 0.7% at 3,067.76 (close)

London – FTSE 100 > UP 1.3% at 7,592.80

Tokyo – Nikkei 225 > Closed for a holiday

West Texas Intermediate > FLAT at $107.80 per barrel

Brent North Sea crude > UP 0.2% at $110.32 per barrel

New York – Dow > UP 2.8% at 34,061.06 (close)

 

  • Reuters with additional editing by Sean O’Meara

 

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Investors Bearish on China as Lockdowns Dent Confidence

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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