HONG KONG (Reuters) – Asian shares were set for their best day in six weeks on Friday led by Chinese tech stocks after reports of a possible resolution to the Sino-U.S. audit dispute, giving investors much needed respite from worries of a global economic slowdown.
Still, a key regional share index was set for its worst month in nine as the Ukraine war and expectations for aggressive U.S. rate hikes in coming months have added to the anxieties, propelling the safe-haven dollar to near 20-year peaks.
Hong Kong listed tech stocks rose as much as 10% on Friday as trading resumed after the lunchtime pause. Ecommerce players JD.com and Alibaba each rose as much as 15% and Meituan gained around 12%.
All three are listed in both the U.S. and Hong Kong bourses. They and their peers’ stock prices had been affected by U.S. moves to delist Chinese companies because Beijing restricted the U.S. audit regulator’s access to their audit documents.
Reports on Friday that a resolution to the dispute was in sight had driven the sharp gains, said Steven Leung executive director of institutional sales at brokerage UOB Kay Hian in Hong Kong.
The gains from Chinese index heavyweights sent MSCI’s broadest index of Asia-Pacific shares outside Japan 1.9% higher, which would be its best day since March 17.
Also helping was the Politburo, the top decision-making body of China’s Communist Party, saying China will step up policy support to stabilise the economy, and a strong Wall Street after robust earnings from Facebook parent Meta Platforms had driven the Nasdaq 3% higher overnight. [.N]
However, Nasdaq futures fell around 0.7% in Asia trade, pressured by disappointing earnings from Amazon after market close.
European futures rose 1.29% and FTSE futures advanced 0.86%.
LONGER TERM FEARS
Friday’s gains marked a recovery to the brutal sell-offs in globally stocks in recent weeks. The Asian regional benchmark is heading for a 5.6%% drop for the month, its worst month since July 2021.
Until Friday’s gains, it was set for its worst month in two years.
“There are four near term catalysts driving the market at the moment: U.S. earnings which we are about half way through, rising U.S. Treasury yields and lots of hawkish speak from the Fed, the war in Ukraine, and China policy,” said Fook-Hien Yap, senior investment strategist at Standard Chartered Wealth Management.
Yap believes Asian shares have room to rise further as much of the bad news was already priced in, though a strong rally in risk assets like equities would need U.S. yields to steady.
The benchmark 10 year yield finished the U.S. session at 2.8205%, having reached as high as 2.981% on April 20. The two year yield was at 2.6132%. [US/]
They didn’t trade in Asia on Friday due to the holiday in Tokyo.
This week has also been a volatile one for currencies.
The dollar index, which tracks the greenback against six major peers fell 0.38% to 103.27 on Friday due to the improved risk sentiment, but was still not far from Thursday’s high of 103.93 – its highest level since late 2022.
The index’s current monthly gain of 5% would be its best since 2015.
On top of the safety-bid for the dollar, the rally has also been fed by market expectations for 150 basis points of rate hikes in just three Federal Reserve meetings. The aggressive Fed tightening path, mainly to curtail sky high inflation, far out paces other global central banks.
The dollar’s recent gains have been most significant against the yen, and it swept past the key psychological 130 yen level on Thursday, setting a fresh 20 year high. [FRX/]
Weakness in China’s yuan gathered pace on Friday, putting the currency on track for its biggest monthly drop since 1994, pressured by broad dollar strength and lockdowns in many major cities to curb the spread of COVID-19.
Oil prices remained choppy as traders grappled with the supply issues stemming from the war in Ukraine as well as the demand impact of lockdowns in China.
Brent crude rose 0.9% on Friday to 108.56 per barrel, U.S. crude rose 0.65% to $106.02. [O/R]
Spot gold rose 0.65% to $1906.7 an ounce. [GOL/]
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