Asian stocks suffered on Thursday as worries over China’s slowing economy and Covid supply chain snarls dominated trading floors across the region.
Fears of higher oil prices also weighed though a dip in US treasury yields offered some relief for markets worried by the prospect of aggressive rate hikes.
Chinese and Hong Kong shares hit month lows and the yuan fell to its lowest in six months as Shanghai authorities reiterated that tough Covid-19 restrictions would remain in place.
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Chinese blue chips shed 1.8% while Hong Kong stocks fell 2% in early sessions, both falling to their lowest level since mid-March. The spot yuan touched 6.4478 per dollar, its softest level since October.
The Hang Seng Index shed 1.25%, or 262.45 points, to close at 20,682.22. The Shanghai Composite Index lost 2.26%, or 71.24 points, to 3,079.81, while the Shenzhen Composite Index on China’s second exchange dropped 3.11%, or 61.84 points, to 1,923.81.
China’s markets largely ignored news on a private pension scheme that will potentially channel more long-term money into the stock market.
Most sectors fell, with tourism and new energy leading the decline down more than 4% each.
Among individual stocks, CNOOC surged as much as 44% in its Shanghai debut, as investors sought safety in the oil giant amid lofty energy prices and quickening inflation.
Tokyo stocks closed higher despite a mixed finish on Wall Street, with investors cheering a lull in recent increases of US treasury yields.
The benchmark Nikkei 225 index ended up 1.23%, or 335.21 points, at 27,553.06, while the broader Topix index was up 0.67%, or 12.85 points, at 1,928.00.
Indian stocks advanced with Mumbai’s signature Nifty 50 index up 1.48%, or 254.15 points, at 17,390.70. Seoul, Jakarta and Sydney were all marginally higher.
China GDP Growth Forecast
The declines pulled MSCI’s broadest index of Asia-Pacific shares outside Japan 0.66% lower, despite gains in Korea and Australia, where the local benchmark rose 0.4% to not far off a record peak.
Analysts at Nomura said they were cutting their Q2 China GDP growth forecast to 1.8% year-on-year from 3.4%, “owing to rapidly worsening high-frequency activity data in April, the rising number of cities under full and partial lockdowns, severe logistics disruptions, and signs that Beijing is unlikely to end its zero-Covid strategy soon.”
A prolonged slowdown in China would have substantial global spillovers, IMF managing director Kristalina Georgieva said on Thursday, but added that Beijing has room to adjust policy to provide support.
However, US and European stock futures pointed to higher opens elsewhere. Eurostoxx 50 futures gained 0.4% and FTSE futures rose 0.3%, while Nasdaq futures jumped 0.8% and S&P500 futures advanced 0.5%.
Part of the reason for the share market gains, said analysts, was the overnight decline in the US benchmark 10-year yield, even if though this might prove shortlived.
It was last at 2.8766%, a little higher in Asia trade, but still bruised after falling from as high as 2.981% early on Wednesday.
Lower yields sent the dollar lower overnight, particularly against the beaten down euro and sterling which managed to recover a little ground.
Yen’s Recovery Temporary
Moves were more muted in Asia hours. The dollar index was little changed at 100.36, down from a near two-year peak the previous day of 101.03.
The dollar gained 0.22% on the yen to 128.16, however, as the yen’s recovery on Wednesday – its first session of gains against the dollar in nearly two weeks – proved temporary.
The yen has quickly slid to 20-year lows, hurt by the Bank of Japan keeping yields pinned down low while rates rise in the United States. Investors believe it has even further to fall, with most betting that even a government intervention wouldn’t be enough to turn around the momentum.
Oil prices firmed in choppy trade as concerns about supply due to a potential European Union ban on Russian oil came to the fore. Russian forces stepped up their attacks in eastern Ukraine on Thursday.
Brent crude futures rose 1.54% to $108.44 a barrel, and U.S. crude futures rose 1.44% to $103.7. Spot gold fell 0.25% to $1,954.7 an ounce.
Key figures
Tokyo – Nikkei 225 > UP 1.23% at 27,553.06 (close)
Hong Kong – Hang Seng Index > DOWN 1.25% at 20,682.22 (close)
Shanghai – Composite > DOWN 2.26% at 3,079.81 (close)
West Texas Intermediate > UP 1.39% at $103.61 per barrel
Brent North Sea crude > UP 1.47% at $108.37 per barrel
New York – Dow > UP 0.7% at 35,160.79 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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