Asia’s major markets gained a small amount of ground on Wednesday following a strong Wall Street lead after traders were lifted by positive US retail figures.
But that minor rally ran out of steam in later sessions as concerns about the economic growth outlook and rising inflation knocked sentiment.
The good news out of the United States was data showing increased spending by Americans in April, with retail sales rising 0.9%, boosted by a lift in auto purchases.
But the US Federal Reserve’s tightening of monetary policy to contain surging inflation continues to worry investors already distracted by China’s Covid-19 lockdowns and the Russian invasion of Ukraine.
Tokyo stocks closed higher for a fourth straight session. The benchmark Nikkei 225 index gained 0.94%, or 251.45 points, to end at 26,911.20, while the broader Topix index climbed 0.96%, or 17.98 points, to 1,884.69.
Hong Kong stocks closed slightly higher too, after an up and down day, and the Hang Seng rose 0.20%, or 41.76 points, to 20,644.28.
On the mainland, the Shanghai Composite Index dropped 0.25%, or 7.72 points, to 3,085.98, while the mainland’s second exchange, the Shenzhen Composite Index, rose 0.08%, or 1.48 points, to 1,941.154.
China’s blue-chip index CSI300, which had bounced more than 6% from an April 27 low, ended the session 0.4% lower.
China’s markets had rebounded on signs China was rolling out more stimulus to aid an economy ravaged by the country’s biggest Covid-19 outbreak in two years.
But Morgan Stanley said in its mid-year outlook that it expects China’s 2022 growth to come in at a below-target 5.2%, with the drag from the Covid-zero strategy “only partially offset by broad-based easing” as signalled in the Politburo meeting.
Property shares, which had rebounded on those signs of policy easing, fell on gloomy April data.
China Tech Boosted
Sentiment was further dampened by data showing foreign investors cut their holdings of Chinese yuan-denominated bonds for the third consecutive month in April, the longest such stretch on record.
Bucking the trend, China’s tech-heavy STAR50 index, home to Chinese chipmakers and high-end manufacturers, rose 0.4%.
Chinese Vice-Premier Liu He had soothed the tech sector’s nerves on Tuesday, saying the government supported its development and “key core technologies.”
Indian stocks inched back with Mumbai’s signature Nifty 50 index down 0.12%, or 19.00 points, to close at 16,240.30, while Sydney and Singapore stayed ahead.
Many analysts have characterised this week’s sharp rally as a short-term bounce of the sort common during a lengthier downward trend for equities. Few are willing to predict the end to selling after a bruising first five months of the year for risky assets given so much macroeconomic uncertainty.
“Investor sentiment and confidence remain shaky and, as a result, we are likely to see volatile and choppy markets until we get further clarity on the 3Rs – rates, recession, and risk,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said.
China, US Growth Forecasts Cut
Commodities have rallied with stocks this week as markets have found reasons to hold out growth hopes, although most prices are below recent highs.
On Wednesday Brent crude futures gained 1.3% to $113.38 a barrel and US crude futures rose 1.64% to $114.24 a barrel.
S&P Global Ratings cut growth forecasts for China, the United States and the euro zone, underlining the weakening outlook for the world’s major economies.
“The global economy continues to face an unusually large number of negative shocks,” chief economist Paul F Gruenwald said.
“Two developments have altered the macro picture,” he said, pointing to Russia’s invasion of Ukraine and inflation, which has turned out to be higher, broader and more persistent than first thought.
Key figures at around 0720 GMT
Hong Kong – Hang Seng Index > UP 0.2% at 20,644.28 (close)
Shanghai – Composite > DOWN 0.3% at 3,085.98 (close)
London – FTSE 100 > UP 0.1% at 7,509.31
Tokyo – Nikkei 225 > UP 0.9% at 26,911.20 (close)
West Texas Intermediate > UP 1.2% at $113.69 per barrel
Brent North Sea crude > UP 0.8% at $112.81 per barrel
New York – Dow > UP 1.3% at 32,654.59 (Tuesday close)
- Reuters with additional editing by Sean O’Meara