Asia shares rallied on Friday boosted by hopes China’s easing of its Covid curbs will lift the global economy.
But those gains were capped by the likelihood of a winter surge in Covid cases worldwide, the looming threat of recession and more rate hikes to come from the US Federal Reserve.
Japanese shares jumped, led by chip-related and other heavyweight stocks, after Wall Street closed higher overnight on optimism that China was now on a path to finding a way to live with Covid.
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The benchmark Nikkei 225 index rose 1.18%, or 326.58 points to end at 27,901.01, marking its biggest daily gain since November 11 The broader Topix index gained 1.03%, or 20.06 points, to 1,961.56.
US stocks advanced overnight, with the S&P 500 snapping a five-session losing streak, as investors saw data showing a rise in weekly jobless claims as a sign the pace of the Federal Reserve’s interest rate hikes could soon slow.
China on Wednesday announced the most sweeping changes yet to its resolute anti-Covid regime since the pandemic began three years ago, loosening rules that curbed the spread of the virus but sparked protests and hobbled the world’s second-largest economy.
Then China’s Premier Li Keqiang, in comments carried by state media, said on Thursday China’s shift in Covid policy would allow the country’s economy to pick up pace, a day after a top-level party meeting pledged to focus on stabilising growth while optimising the pandemic measures.
Hong Kong’s index advanced, with mainland developers up a whopping 4%. Chinese blue chips, however, saw more subdued gains.
The Hang Seng Index advanced 2.32%, or 450.64 points, to 19,900.87.
The Shanghai Composite Index edged up 0.30%, or 9.60 points, to 3,206.95, while the Shenzhen Composite Index on China’s second exchange gained 0.56%, or 11.47 points, to 2,075.84.
US Producer Inflation Figures
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9%, edging closer to a three-month high hit earlier in the week.
Elsewhere across the region, Indian stocks dropped with Mumbai’s signature Nifty 50 index down 0.61%, or 112.75 points, to close at 18,496.60.
Apart from China optimism, investors are focused on US producer price inflation figures later in the day for more signs about the health of the US economy, after data overnight showed some loosening in the labour market, with weekly jobless claims rising moderately.
US stocks snapped their recent losing streak to rebound. The Dow Jones Industrial Average rose 0.55%, the S&P 500 gained 0.75%, and the Nasdaq Composite added 1.13%.
US monthly consumer inflation data is also due next week, with economists forecasting inflation likely slowed slightly to 8.0% in November from a year earlier, compared with 8.2% in October.
Futures have priced in a near-certain possibility that the Fed will slow down its rate hike to 50 basis points next week, but the target US federal funds rate would have to peak around 4.9% by next May.
Analysts at Barclays expect the key objective for the Fed at this meeting would be to execute a transition to slower hikes without easing broader financial conditions.
US Dollar Slides
The Fed, the European Central Bank and the Bank of England are all set to announce interest rate decisions next week as policymakers continue to tap the brakes on economic growth through firmer rates to thwart stubbornly high inflation.
The US dollar slid 0.2% against a basket of major currencies on Friday, on top of a drop of 0.4% overnight. The safe-haven greenback was set to finish the week flat.
Treasury yields rose overnight and remained largely steady, after falling to the lowest in three years earlier in the week on expectations of slower growth or that a recession will curb the rise in rates.
In the oil market, prices rose after tumbling the day before amid fears a slowdown in the global economy would lead to reduced demand.
Key figures
Tokyo – Nikkei 225 > UP 1.18% at 27,901.01 (close)
Hong Kong – Hang Seng Index > UP 2.32% at 19,900.87 (close)
Shanghai – Composite > UP 0.30% at 3,206.95 (close)
London – FTSE 100 > UP 0.21% at 7,487.56 (1020 GMT)
New York – Dow > UP 0.55% at 33,781.48 (Thursday close)
- Reuters with additional editing by Sean O’Meara
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