Asia’s major stock indexes edged ahead on Thursday despite shaky economic data out of China and continuing fears of a US banking sector crisis and more rate hikes.
Yesterday a US Fed policy statement heightened worries over more tightening and there were signs of stress at another US regional bank, with PacWest Bancorp reporting troubles.
However, Shanghai and Hong Kong stocks rose, led by gains in their financials and state-owned enterprises after the May Day holiday, while shares traded in Shenzhen were down.
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Bank of China, Bank of Communications, and China Pacific Insurance Group all saw their stocks soar 6.0%, 5.2% and 8.1%, respectively. The Hang Seng Mainland Banks Index gained 2.9%, with Ping An Insurance Group of China Ltd up 6.2%.
Those lifts came despite China’s factory activity unexpectedly dipping in April due to softer domestic demand, suggesting the manufacturing sector is losing momentum amid a bumpy post-Covid recovery.
There was some good news for the world’s No2 economy, though, with China’s tourism rebounding to pre-Covid 19 levels over the May Day holiday as the number of domestic trips rose by more than two-thirds from a year earlier.
The Shanghai Composite Index rose 0.82%, or 27.18 points, to 3,350.46, while the Shenzhen Composite Index on China’s second exchange edged down 0.08%, or 1.64 points, to 2,054.40.
The Hang Seng Index gained 1.27%, or 249.57 points, to 19,948.73.
Elsewhere across the region, in early trade, Sydney, Seoul, Wellington and Singapore were down, while Mumbai, Taipei, Jakarta and Manila were up.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.6% in trade thinned by Japanese holidays this week.
PacWest Stocks Plummet
Globally, stock markets sagged while the Japanese yen rose in reaction to the Fed’s policy statement and worrying signs from another US regional bank, spurring investors to price in a pivot rather than just a pause in rate increases.
The Federal Reserve had raised interest rates by a quarter of a percentage point and signalled it may pause further increases, giving officials time to assess the fallout from the bank failures, wait on a political resolution to the US debt ceiling and monitor inflation.
Although investors initially cheered the possibility of a pause, their confidence waned as Chair Jerome Powell spoke, clarifying inflation remains the chief concern and that it is too soon to say with certainty that the rate-hike cycle is over.
The European Central Bank meets later and is expected to raise rates. It will be a seventh rate rise for the ECB, the central bank for a 20-country zone whose headline inflation is 7% and that has so far dismissed the ongoing banking crisis as US-specific.
European stocks seemed languid too, with the Eurostoxx 50 futures flat and FTSE futures down 0.21%
E-mini futures for the S&P 500 fell 0.22%, reflecting the dramatic slide in regional banking shares after the close of US markets. The S&P 500 had closed 0.70% lower.
PacWest fell nearly 60% after announcing it is exploring strategic options, including a potential sale or capital raise. A liquidity boost it announced in March failed to inspire confidence in its ailing share price.
Treasury futures rallied, as did Fed Funds futures, the latter implying a 52% chance of a rate cut in July. The two-year note rose in price to a yield of 3.8%.
The Japanese yen strengthened 0.1% versus the greenback at 134.51 per dollar, adding to its more than 1% rise on Wednesday.
Key figures
Tokyo – Nikkei 225 <> CLOSED
Hong Kong – Hang Seng Index > UP 1.27% at 19,948.73 (close)
Shanghai – Composite > UP 0.82% at 3,350.46 (close)
London – FTSE 100 < DOWN 0.41% at 7,756.18 (0932 GMT)
New York – Dow < DOWN 0.80% at 33,414.24 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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