Asian stocks had their best day in six weeks, led by Chinese tech stocks, as the MSCI World Stock Index rose for the second day and European stocks opened higher.
While these moves gave investors much-needed respite from fears of a slowing global economy, inflation and war in Ukraine, it was a torrid month for riskier assets, from equities to markets. emerging. Global equities have lost 5.8% so far in April, their worst month since March 2020.
A 5% rise in the dollar index, its biggest monthly rise in seven years, has meanwhile hit other currencies, with the yen the biggest loser, hitting two-decade lows.
The dollar fell 0.6% on Friday, however, ending a four-day streak of gains against a basket of currencies.
“Perhaps the dollar crescendo has peaked,” said Colin Asher, senior economist at Mizuho, noting that aggressive interest rate hikes by the US Federal Reserve had already been assessed and there were “a certain double-sided risk that the Fed actually achieves what has been valued”.
Markets expect rate hikes of 150 basis points over the next three Fed meetings, far outpacing other global central banks.
Those bets weren’t changed by Thursday’s data showing that the US economy contracted in the first quarter of 2022, although the numbers underscored the risks to growth posed by a tightening of monetary policy.
“If the monetary tightening is as strong as expected, (American) growth will be zero by the end of the year,” added Mr. Asher.
Friday’s market rally was also helped by reports that a resolution was in sight in the dispute over the listing of Chinese companies in the United States, said Steven Leung, executive director of institutional sales, the brokerage. UOB Kay Hian from Hong Kong.
Hong Kong-listed technology stocks rose as much as 10%, led by e-commerce players JD.com, Alibaba and Meituan which gained 12-15%.
These three companies are listed on both the US and Hong Kong stock exchanges and their stock prices were affected by the dispute.
Gains by Chinese index heavyweights pushed the MSCI Asia Pacific Index <.MIAPJ0000PUS> up 1.9%.
Comments from the Politburo, the Chinese Communist Party’s top decision-making body, that the government will step up political support to stabilize the slowing economy, and a strong stock market after strong earnings from Meta Platforms, Facebook’s parent company, sent the Nasdaq up 3% overnight. [.N]
However, Nasdaq futures were down 0.7%, under pressure from Amazon’s disappointing results after the market closed… Frankfurt-listed Amazon shares fell 8%.
LONGER TERM FEARS
It’s been a healthy earnings season so far, with most companies beating estimates, but fears are mounting that high input costs and a slowing global economy will dampen the outlook.
“There are four near-term catalysts driving the market right now: US earnings of which we are about halfway, rising US Treasury yields and the many hawkish rhetoric from the Fed, the war in Ukraine and political China,” said Fook-Hien Yap, senior investment strategist at Standard Chartered Wealth Management.
The benchmark 10-year yield slipped from 2.4% to 2.84%, after peaking at 2.981% on April 20 and ending a five-month winning streak. [US/].
In Europe too, government bond yields slipped despite better-than-expected French inflation figures, in the wake of German printing rising sharply the day before.
As the Dollar Index slid, other currencies firmed, with the Euro up 0.6% at $1.0568, after dipping below the $1.05 level on Thursday for the first time since 2017.
The yen, which broke above the key psychological level of 130 yen on Thursday, recovered 0.75% to 129.9 .
The overseas-traded Chinese yuan also firmed but was heading for its biggest monthly decline since 1994, under pressure from prolonged shutdowns in many major cities to curb COVID-19.
“Much of the price of the dollar has been fixed and some catching up is needed for the laggards,” said Mizuho’s Asher.
He added, however, that concerns about China could continue to support safe-haven dollar flows.
“The Chinese lockdowns seem more protracted and the authorities are somewhat timid in launching countermeasures to limit the (economic) slowdown.”