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Saturday, December 10, 2022

Asian stocks grapple with growth concerns as central banks tighten

Usa Economy

Asian stock markets slipped on Thursday as continued concerns over growth in China and concerns about the Federal Reserve’s intention to tighten policy quickly, confirmed in minutes of a rate-setting meeting issued overnight in early May. done.

High Wall Street closed higher after minutes that showed a majority of Fed policymakers supported half a percentage-point rate hike in June and July, along with a consensus outlook that the economy was strong, the mood subdued in Asia Was.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.6 per cent, losing 5 per cent for the month.

Australian shares were down 0.47 per cent, while Japan’s Nikkei stock index was down 0.17 per cent. In early European trade, pan-area Euro Stoxx 50 futures were down 0.14 pc, as were German DAX futures.

“It is very difficult for investors to navigate this market at the moment with high inflation, slow growth, rising interest rates and concerns about the Chinese (COVID-19) situation, but also stagflation as a potential issue. emerging.” Ryan Feldsman, senior economist at fund manager ComSec, said.

The decline in Asia is in contrast to a more upbeat mood on Wall Street, where the Dow Jones Industrial Average rose 0.6pc, the S&P 500 0.95pc and the Nasdaq Composite 1.51pc.

At the Fed’s May 3-4 meeting, all participants supported a half percentage-point rate hike – the first of that size in more than 20 years – and “the majority of participants” decided that further increases of that magnitude “were appropriate.” likely”. Fed policy meetings in June and July, according to meeting minutes

While some investors worry that an overly aggressive interest rate hike by the Fed could propel the economy into recession, minutes from Wednesday seem to suggest the Fed will pause its strident streak to assess the impact on growth.

The immediate focus is on Thursday’s Commerce Department release of its second take on first-quarter GDP, which analysts expect to show a slightly shallow contraction compared to the 1.4pc quarterly annual decline that analysts originally reported.

Matt Simpson, senior market analyst at Broker City Index, wrote, “The Fed is crossing its fingers today to revise first quarter GDP upwards, as another prints stagflation of -1.4 pc or worse.” may raise concerns.

Elsewhere in Asia, South Korea’s central bank raised interest rates for a second consecutive meeting as it hit a 13-year high with consumer inflation.

Chinese blue-chips fell initially, but rose as the day progressed after a drop in daily COVID-19 cases in a country where lockdowns aimed at halting the spread of the virus sought to undermine recent economic aid measures. threatened.

Mainland markets also wanted relief in Premier Li Keqiang’s comments on Wednesday that China would strive to achieve reasonable economic growth in the second quarter and prevent rising unemployment.

After rising on Wednesday after Fed minutes, the dollar changed little in Asian trade. It was barely changed against the yen at 127.30, while the euro was almost flat at $1.0675.

The dollar index, which tracks the greenback against a basket of key peers, was up just 0.13 percent at 102.20.

Moves in the US Treasury yield were also muted. The 10-year yield was flat at 2.781pc and the policy sensitive two-year yield was flat at 2.502pc.

Crude oil was steady after a cautious rally this week, with Brent crude trading flat at $114.03 (€106.80) a barrel and US crude up 0.13pc at $110.47 (€103.47).

Spot gold was down 0.2% at $1,849.19 (€1731.95) an ounce.

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