Asia stocks began the week on the front foot, rallying despite contradictory signals about China’s plans to reopen its economy and ease back on its aggressive ‘zero-Covid’ policy.
Risk assets had rallied on Friday amid speculation China was preparing to relax its pandemic restrictions, but over the weekend health officials reiterated their commitment to the “dynamic-clearing” approach to Covid cases as soon as they emerge.
But most indexes were in the green on Monday with investors still hopeful there might be something to the China loosening story.
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“Despite the denial, notions that China will pivot to living with Covid in the new year are unlikely to be quashed given the very real toll that zero-Covid is having on the economy,” said Tapas Strickland, head of market economics at NAB.
“With China going into winter [though], most analysts think a change in zero-Covid is unlikely until at least March.”
Goldman Sachs said in a note to clients that Chinese stocks could rally 20% on and before the reopening, as equity markets tend to respond about a month in advance of policy changes and the positive momentum typically lasts for two-three months.
Japan’s benchmark Nikkei 225 index gained 1.21%, or 327.90 points to end at 27,527.64 off the back of some strong earnings returns. The broader Topix index rose 0.98%, or 18.69 points, to 1,934.09.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.0% and stocks in both mainland China and Hong Kong advanced.
Chinese blue chips edged up 0.2%, a decent performance given data released earlier showed Chinese exports and imports both contracted in October and missed forecasts.
The Shanghai Composite Index was up 0.23%, or 7.02 points, to 3,077.82, while the Shenzhen Composite Index on China’s second exchange rose 0.38%, or 7.69 points, to 2,027.86.
Hong Kong’s Hang Seng Index, though, continued last week’s rebound advancing 2.69%, or 434.77 points, to 16,595.91.
Elsewhere across the region, stock markets chalked up gains across-the-board, underpinning Friday’s rise in global shares after US jobs data came in stronger than expected.
Indian stocks advanced with Mumbai’s signature Nifty 50 index up 0.47%, or 85.65 points, to close at 18,202.80.
US stock futures and commodities slipped in Asia on Monday after Beijing’s denials over the rumoured easing of its zero Covid-19 policy, though resilience in Asian equities took some of the sting out of the selling.
Speculation that China might open its economy saw copper jump 7% on Friday in its biggest one-day rally since 2009, while a range of resources all benefited from hopes of increased demand.
It also sent the yuan surging and triggered a round of profit-taking on long US dollar positions, particularly against commodity sensitive currencies such as the Australian dollar.
A little of that reversed on Monday, with the Aussie down 0.7% after jumping 3% on Friday. The dollar gained 0.7% on the offshore yuan.
The US dollar index bounced 0.3% having dived almost 2% at the end of last week. The dollar was 0.4% firmer on the yen at 147.22, while the euro eased a fraction to $0.9929.
S&P 500 futures dipped 0.2%, while Nasdaq futures lost 0.3%. EUROSTOXX 50 futures lost 0.2% and FTSE futures 0.6% amid reports the UK government was planning tax rises and spending cuts.
Aiding risk sentiment at the margin were reports the White House is privately encouraging Ukraine to signal an openness to negotiate with Russia.
In commodity markets, gold eased back to $1,671 an ounce after jumping over 3% on Friday.
Oil futures lost some of their recent gains with Brent off $1.07 at $97.50, while US crude dropped $1.26 to $91.35 per barrel.
Tokyo – Nikkei 225 > UP 1.21% at 27,527.64 (close)
Hong Kong – Hang Seng Index > UP 2.69% at 16,595.91 (close)
Shanghai – Composite > UP 0.23% at 3,077.82 (close)
London – FTSE 100 < DOWN 0.05% at 7,331.57 (0940 GMT)
New York – Dow > UP 1.26% at 32,403.22 (Friday close)
China Exports, Imports Fall in October as Global Demand Drops
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