December 5, 2022

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Asian stocks rebounded as China moves to boost housing

Asian stocks rebounded as China moves to boost housing

FILE PHOTO – An investor stands in front of an electronic board displaying stock information at a brokerage house in Shanghai, China, August 24, 2015. REUTERS/Ali Song

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  • MSCI Asia excluding Japan +1.8%, Nikkei +1.3%
  • European stocks are set to follow in Asia
  • Stocks rise after China cuts key loan rate
  • Global stocks are preparing for the seventh weekly loss

SHANGHAI (Reuters) – Asian stocks jumped on Friday after China cut a key lending benchmark to support a sluggish economy, but a gauge of global stocks remained set for its longest-ever streak of weekly losses amid investor concerns about slowing growth.

China cut its five-year loan base rate (LPR) by 15 basis points on Friday morning, a sharper cut than expected, as authorities seek to mitigate an economic slowdown by reviving the housing sector. The five-year rate affects the pricing of mortgages. Read more

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) It quickly posted early gains after the cut and was last up more than 1.8%.

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European stocks were set to follow Asia’s lead, with region-wide Euro Stoxx 50 futures, German DAX futures and FTSE futures up more than 1%.

Chinese blue-chips also rose 1.8%, backed by foreign buying, and Hong Kong’s Hang Seng Index (.HSI) Jumped more than 2%, while Australian shares jumped (.AXJO) It rose 1.1%. In Tokyo, the Nikkei (.N225) Gained 1.3%.

“While it certainly won’t be enough to reverse growth headwinds in the second quarter, (the cut) is a move in the right direction, so markets may react to expectations of stronger easing in the second quarter,” said Carlos Casanova, chief Asia economist at Union Bancaire Privee. the future”. in Hong Kong.

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Despite gains in Asian stocks, MSCI’s global price index for all countries (.MIWD00000PUS) It remained heading for the seventh consecutive week in the red, the longest such stretch since its debut in 2001. It would also be the longest including back-tested data until January 1988.

Concerns about the impact of troubled supply chains on inflation and growth have prompted investors to dump stocks, with Cisco Systems Inc (CSCO.O) It drops Thursday to an 18-month low after warning of persistent shortages of ingredients, citing the impact of China’s COVID lockdowns. Read more

On Friday, China’s financial hub Shanghai rattled residents’ hopes for a smooth end to restrictions as it announced three new cases of COVID-19 outside quarantine areas — although plans to end a prolonged citywide lockdown on June 1 appear to be still on the right track. . Read more

Industrial production in the city contracted by more than 60% in April compared to the previous year due to the impact of the coronavirus restrictions. Read more

“The focus of (Chinese) officials has been on coming up with mitigating policies to mitigate the impact of the suppression of COVID … The problem is that these easing policies will not have any real effect as long as the policy of suppressing COVID is tightly enforced,” said Christopher Wood, global head of equities at Jefferies.

Gains in Asia came after Wall Street’s late rally faded, leaving the Dow Jones Industrial Average (.DJI) The S&P 500 Index is down 0.75%. (.SPX) The Nasdaq Composite Index is down 0.58% (nineteenth) by 0.26%.

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strongest yuan

In the currency market, the dollar index pulled back from its previous small gains to fall 0.12% to 102.79, heading into its first losing week in seven days.

Moves elsewhere were muted, with the dollar on the stronger side of stability against the safe-haven yen at 127.76. The euro was barely higher at $1.0586, erasing earlier losses.

The inland Chinese yuan made larger moves, turning from a decline of 0.32% to a two-week high of 6.6699 per dollar. The most traded offshore yuan also hit a two-week high of 6.6855 per dollar.

While long-term US government bond yields rose after the Chinese LPR price cut, reflecting gains in equities, they subsequently eased.

The yield on the 10-year US Treasury was last at 2.855%, flat from Thursday’s close, and down from a high of 2.922% earlier on Friday. The two-year yield rose to 2.6327% compared to the US close of 2.611%.

Crude prices pared losses after the Chinese LPR announcement but later extended their losses on fears of faltering demand.

Brent crude was last down 0.53% to $111.45 a barrel, and US West Texas Intermediate crude was down 1.21% at $110.85 a barrel.

Gold bounced higher and was on track for its first weekly gain since mid-April, buoyed by dollar weakness. Spot gold rose 0.26% to $1,846.49 an ounce.

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(Reporting by Andrew Galbraith) Editing by Lincoln Fest and Sam Holmes

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