- Asian Stock Markets:
- Nikkei climbs 0.9% to its highest level in 1 1/2 years
- China and Hong Kong back in red; US stock futures rise
- US data bolsters confidence that the Fed is on pause and points to the risk of a slowdown
- Bank fears linger, PacWest is down 23%
SYDNEY, May 12 (Portal) – Most Asian stock markets were subdued on Friday and the dollar maintained gains on safe-haven flows after weak economic data from the US and China fueled concerns of a global slowdown.
With the opening of the European markets, the mood should improve somewhat. Euro Stoxx 50 regional futures were up 0.3%, Nasdaq futures were up 0.3% and S&P 500 futures were up 0.2%.
In Asia, MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 0.6% and was heading for a 1.2% weekly decline, weighed down by a slew of data out of China pointing to a sluggish economic recovery after the increase hinted at COVID lockdowns.
However, Japanese equities fared better, with the Nikkei (.N225) climbing 0.9% to its highest level since November 2021 as investors cheered announcements of higher shareholder returns during earnings season.
China’s blue chips (.CSI300) are down 1.1% and are expected to fall 1.7% this week, while Hong Kong shares (.HSI) are down 0.7% on the day.
China’s economic recovery appears to be losing momentum as new bank lending fell sharply in April, consumer prices rose at their slowest pace in more than two years and imports fell unexpectedly, prompting a collapse in commodity prices from copper to iron ore to oil .
Overall, data showed that US jobless claims rose to a 1 1/2 year high last week, while producer prices posted the smallest annual increase in more than two years, suggesting a potentially more abrupt slowdown in the largest economy the world suggests.
However, the data bolstered confidence that the Federal Reserve will almost certainly suspend rate hikes at its June monetary policy meeting, with futures markets continuing to price in around 78 basis points of rate cuts by year-end.
“It’s kind of a chaotic backdrop for equity and investment markets,” said Shane Oliver, chief economist at AMP in Sydney, citing weaker global growth and the return of banking worries.
“The silver lining is that inflationary pressures are easing, taking the pressure off central banks even as the Bank of England continues to hike interest rates.”
Bank fears echoed overnight. PacWest (PACW.O) led further declines in U.S. regional banks with a sharp 23% drop overnight after the company reported a 9.5% drop in its deposits last week.
Shares in major US banks also fell after the US Federal Deposit Insurance Corporation (FDIC) said major lenders would bear the cost of replenishing their deposit insurance fund caused by recent bank failures.
That dragged the Dow (.DJI) lower, though Nasdaq (.IXIC) gained 0.2%, helped by a 4.3% gain in Alphabet Inc (GOOGL.O) on the launch of more artificial intelligence products.
Uncertainty about an increase in the US debt ceiling remained. A meeting between US President Joe Biden and senior lawmakers scheduled for Friday has been pushed back to early next week. The IMF warned that a US default would have a “severe impact” on the US economy.
The US dollar benefited from safe-haven flows amid growth and banking concerns, holding its 0.6% gain overnight at 102.02 against a basket of currencies.
The euro fluctuated at $1.0925, just above its one-month low, and the pound sterling posted losses at $1.2524, nearing a one-week low.
Government bond yields were slightly lower in Asia after longer-dated government bond yields fell further overnight on weak data. The benchmark 10-year bond yield was 2 basis points lower at 3.375%, while the 2-year bond yield was also 2 basis points lower at 3.883%.
The Bank of England stuck to the script and raised interest rates by a quarter of a point to 4.5% on Thursday. However, it pledged that it would “stay on course” to curb the highest inflation of any major economy.
Oil prices are likely to fall for the fourth week in a row. US crude futures were down slightly, down 0.4% to $70.56 a barrel, while Brent crude fell 0.5% to $74.59 a barrel.
Gold prices fell 0.2% to $2,011.41 an ounce.
Reporting by Stella Qiu; Edited by Kim Coghill
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