Asia Stocks Rebound as China Exits Lockdowns, Fed Fears Ease

 

Asian markets sprang back into life on Monday as China continued to ease back on its Covid curbs, raising hopes of a recovery in the world’s No-2 economy.

The gains came on the back of a positive end to last week for global equities with some observers hopeful the global sell-off, sparked by the worldwide pandemic and war in Ukraine, may be almost over.

Hong Kong put on more than 2% after a strong Friday performance fuelled by a rally in tech firms as traders welcomed an easing of Covid containment measures in Shanghai and Beijing. The Hang Seng Index climbed 2.06%, or 426.57 points, to 21,123.93.

 

Also on AF: China’s Zero-Covid Policy a Bonanza for Testing, Building Firms

 

Tokyo stocks closed higher on Monday, extending gains on Wall Street, with investors shifting their focus to global economic indicators due this week. The benchmark Nikkei 225 index gained 2.19%, or 587.75 points, to 27,369.43, while the broader Topix index added 1.86%, or 35.14 points, at 1,922.44.

Mainland China stocks rose too as the capital Beijing and financial hub of Shanghai eased their coronavirus restrictions, with consumer and travel stocks leading the gains on expectation of a return to normal life.

The Shanghai Composite Index added 0.60%, or 18.82 points, to 3,149.06, while the Shenzhen Composite Index on China’s second exchange rose 1.07%, or 20.86 points to 1,975.89. China’s blue-chip CSI300 index ended 0.7% higher at 4,029.02.

Indian stocks also recovered with Mumbai’s signature Nifty 50 index up 1.89%, or 308.95 points, at 16,661.40.

Sydney, Seoul, Taipei, Manila, Bangkok and Wellington were also well up. London, Paris and Frankfurt all rallied at the open.

Globally, shares rose too and the dollar was pinned near five-week lows on hopes of an eventual slowdown in US monetary tightening following sharp interest rate hikes in June and July. 

The MSCI’s benchmark for global stocks rose 0.6% to its highest in more than four weeks by 0745 GMT, driven by a positive open in Europe and strong gains in Asia overnight. The index is up 0.4% so far this month.

 

Fed Rate Hike Cycle Pause Hopes

Although Wall Street will be shut for the Memorial Day, US futures were trading. S&P 500 e-minis rose 0.9%, having rallied 6.6% last week in their best run so far this year, while Nasdaq e-minis added another 1.3%.

Investors have seized on hints that the Federal Reserve, once it has hiked aggressively over the next two months, might then slow its tightening. 

“Talk of a pause in the Fed rate hike cycle is doing wonders for everything ranging from equities to bonds and – unfortunately – commodities too,” AFS Group analyst in Amsterdam Arne Petimezas said.

The chance of a less hawkish Fed was enough to see Treasuries rebound, with 10-year note yields just above a six-week low at 2.743%. That is down from a peak of 3.203% on May 9.

Oil prices have been supported by expectations for stronger demand as the US driving season gets under way, and as European Union nations negotiate on whether to impose an outright ban on Russian crude oil.

The EU failed on Sunday to agree on an embargo of Russian oil, but diplomats will still try to make progress ahead of a Monday-Tuesday summit.

 

Key figures at around 0720 GMT

Tokyo – Nikkei 225 > UP 2.2% at 27,369.43 (close)

Hong Kong – Hang Seng Index > UP 2.1% at 21,123.93 (close)

Shanghai – Composite > UP 0.6% at 3,149.06 (close)

London – FTSE 100 > UP 0.4% at 7,613.50

Brent North Sea crude > UP 0.5% at $120.03 per barrel

West Texas Intermediate > UP 0.7% at $115.91 per barrel

New York – Dow > UP 1.8% at 33,212.96 (Friday close)

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean O’Meara

Sean O’Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.