SHANGHAI, Jan 20 ― Asian stock markets broke a five-day slide to climb higher today, brushing aside declines in Europe and Wall Street overnight as China highlighted its divergent monetary and economic situation by reducing benchmark mortgage rates.
Despite the more steady start in Asia, ING analysts said geopolitical risks, including the possibility of Russia invading Ukraine, could continue to weigh on global equities, adding to existing pressure from the outlook for higher prices. rate.
“Markets may soon start pricing in an increased risk of an outbreak of conflict between Russia and Ukraine, which is one reason stocks may continue to sell off and why Treasury yields may not are not on a higher one-way ticket.”
US President Joe Biden yesterday predicted Russia would act on Ukraine, saying a full-scale invasion would be ‘a disaster for Russia’ but suggesting there may be a lower cost for a ‘minor incursion’ “.
Expectations that the U.S. Federal Reserve will raise interest rates faster to fight inflation hit tech stocks particularly hard overnight, pushing the Nasdaq down more than 1% into correction territory.
The selloff also hit bonds, pushing US Treasury yields to two-year highs yesterday and pushing Germany’s 10-year yield into positive territory for the first time since May 2019, with investors betting policymakers policies will limit years of stimulus to combat rising inflation exacerbated by supply chain disruption.
“There comes a point where you’ve unloaded, you might want to stop unloading. If bonds start to rally a bit and you saw yields drop yesterday in the US, it makes it look like…we might not actually get a follow today,” Matt Simpson, senior market analyst at City Index, told Sydney.
In stark contrast to the global move towards tougher policy and higher rates, China today cut its benchmark mortgage rate for the first time in nearly two years. The move follows a surprise cut in the central bank’s rate for one-year medium-term loans on Monday.
Chinese monetary authorities have signaled that they will take further easing measures this year to support slowing growth in the world’s second-largest economy. Data released on Monday showed weak consumption and the real estate sector clouding the outlook despite strong overall growth
China’s blue-chip CSI300 index rose 0.7% this morning and Hong Kong’s Hang Seng added more than 1.4%. The rise in Chinese stocks boosted MSCI’s broadest index of Asian stocks outside of Japan, which added 0.54%.
Seoul’s Kospi edged up 0.1% and Australian stocks fell within the same range. In Tokyo, the Nikkei added 0.17%.
The modest gains in Asia came after Wall Street investors overshot robust earnings from the outlook for inflation and higher rates.
The Dow Jones Industrial Average fell 0.96% and the S&P 500 lost 0.97%. The Nasdaq Composite fell 1.15%, putting it more than 10% below its November 19 closing high to confirm a correction.
During the Asian session, US yields rose slightly, but remained below their previous session highs. The benchmark 10-year yield rose to 1.8485% from a US close of 1.827%, and the policy-sensitive two-year yield rose to 1.0449% from a US close of 1.025%.
The pause in higher Treasury yields kept the dollar in check, the dollar index which measures the greenback against six major peers fell slightly to 95.477 as commodity currencies benefited from high oil prices.
The Australian dollar was 0.4% higher.
The dollar slipped 0.08% against the Japanese yen to 114.23 and the euro rose 0.15% to $1.1356 (RM4.77).
Oil prices, which yesterday touched their highest levels since 2014 due to strong demand and short-term supply disruptions, retreated. Global benchmark Brent fell 0.84% to US$87.70 a barrel and US crude fell 1.1% to US$86 a barrel.
Gold continued to climb after marking its best session in three months a day earlier. Spot gold rose 0.08% to US$1,841.12 an ounce. ― Reuters