Asian stocks held on to their gains from this week’s sensational rebound fuelled by China’s pledge of support for its markets.
But a heady cocktail of rising interest rates, high oil prices and no end to war in Ukraine kept a lid on the bounceback on Friday as yields sent a warning signal for the economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.15% and Hong Kong’s Hang Seng steadied following a furious two-day surge while Japan’s Nikkei edged up.
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Hong Kong stocks finished Friday slightly lower as profit-takers moved in after notching up more than 16% in gains in the previous two days following China’s signal of support.
The Hang Seng Index slipped 0.41%, or 88.83 points, to 21,412.40. The Shanghai Composite Index climbed 1.12%, or 36.03 points, to 3,251.07, while the Shenzhen Composite Index on China’s second exchange gained 0.56%, or 11.89 points, to 2,144.90.
Tokyo stocks notched up a five-day winning streak on Friday, closing higher as fears receded that Russia might default on its bonds.
The benchmark Nikkei 225 index gained 0.65% or 174.54 points to 26,827.43, advancing 6.6% on the week, while the broader Topix index added 0.54% or 10.26 points to 1,909.27.
The MSCI world stock index was flat at 695 points, up 5.4% for the week but well below its lifetime high of 761.21 from January 4.
“Sentiment is still pretty cautious, it’s looking for some reason to rally but it’s struggling to find something which it has strong conviction in,” said Seema Shah, chief strategist at Principal Global Investors.
Russia-Ukraine Peace Talks
Oil prices remained above $100 a barrel after slim progress in peace talks between Russia and Ukraine raised the spectre of tighter sanctions and a prolonged disruption to crude supply.
Adding to the mix, US President Joe Biden is expected to deliver a warning that Beijing will pay a price if it supports Russia’s war effort when he speaks to China’s President Xi Jinping on Friday.
A first Russian external bond default since the Bolshevik Revolution however appears to have been have averted for now. Sources say some creditors have received payment, in dollars, of Russian bond coupons which fell due this week.
The impact on inflation of ports and supply chains disruptions in China due to a spike in Covid infections, risks being massively overlooked by markets, said Michael Hewson, chief markets analyst at CMC Markets.
“That is going to be a headwind for valuations and while we are getting a fairly decent rebound at the moment, I really struggle to see us whether or not we can move above the highs we have seen this year,” Hewson said.
Bank Of England Rate Hike
Problems faced by policymakers whose economies are suffering surging inflation and sagging growth were underscored during a series of central bank meetings this week.
The Fed raised rates for the first time in more than three years on Wednesday, and surprised traders with a more hawkish than expected outlook. The Bank of England also hiked but surprised with a dovish outlook that drove a rally in gilts.
The Bank of Japan offered no surprises on Friday, leaving policy ultra easy, which has kept heavy pressure on the yen.
Spot gold hovered at $1,935, down 0.5%, and bitcoin was clinging on above $40,000, down 0.7%.
Key figures around 0820 GMT
Hong Kong – Hang Seng Index > DOWN 0.4% at 21,412.40 (close)
Tokyo – Nikkei 225 > UP 0.7% at 26,827.43 (close)
Shanghai – Composite > UP 1.1% at 3,251.07 (close)
London – FTSE 100 > UP 0.2% at 7,400.82
Brent North Sea crude > UP 1.4% at $108.13 per barrel
West Texas Intermediate > UP 1.6% at $104.62 per barrel
New York – DOW > UP 1.2% at 34,480.76 (Thursday close)
- Reuters with additional editing by Sean O’Meara
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