Asian stocks rebound, US-China tensions overshadow economic optimism

TOKYO (Reuters) – Asian stocks rallied from a three-month low on Friday thanks to a rally on Wall Street late in the day as optimism about the global economic recovery was overshadowed by rising tensions between the West and China. .

FILE PHOTO: Pedestrians and a stop sign at a traffic light are reflected on a listing board in Tokyo, Japan, on February 26, 2021. REUTERS / Kim Kyung-Hoon

The MSCI ex Japan Asia Index rose 0.37% after hitting a nearly three-month low on Thursday, while the Shanghai Composite Index gained 0.78%, snapping a three-day losing streak.

“The recent declines in Chinese stocks have been worrying, but there is no change in the fact that the Chinese economy is recovering,” said Yasutada Suzuki, head of emerging markets investment at Sumitomo Mitsui Bank.

On Thursday, Chinese stocks fell near a three-month low earlier in the month. The European Union joined Washington allies this week in imposing sanctions on officials in China’s Xinjiang region for allegations of human rights abuses, prompting retaliatory sanctions from Beijing.

“All the sanctions so far have been largely symbolic and should have little economic impact. But the Sino-US confrontation is hurting market sentiment. It could take some time for them to reach a compromise, ”Suzuki added.

Japan’s Nikkei rose 0.89% after Wall Street stocks rallied, driven by cheap, cyclical stocks that have been hit by the pandemic.

The Dow Jones Industrial Average was up 0.62% and the S&P 500 gained 0.52%, while the Nasdaq Composite added just 0.12%.

Analysts said trading was being driven more by a rebalancing of end-of-quarter investment portfolios by institutional investors than news flow, although they noted that overnight headlines were primarily supportive of equities. .

Data from the US Department of Labor showed that claims for unemployment benefits fell to a one-year low last week, a sign that the US economy is on the verge of stronger growth at measure that improves the public health situation.

In his first formal press conference, United States President Joe Biden said he would double down on his administration’s vaccine implementation plan after hitting the previous goal of 100 million injections 42 days ahead of schedule.

But while the improvement in the US health crisis has bolstered risk appetite globally, investors are increasingly alarmed by the divergence in health conditions.

“Vaccination in continental Europe is being delayed. In relation to the United States, economic reopening is likely to be delayed as some countries are forced to impose lockdowns, “said Soichiro Matsumoto, Japan’s chief investment officer at Credit Suisse’s private banking unit in Tokyo.

That put pressure on the euro, which licked its wounds to $ 1.1780 after falling as low as $ 1.1762 overnight, its lowest levels since November.

The dollar also rose to 109.17 yen, a surprising distance from last week’s nine-month high of 109.365 yen.

The US currency index was near its highest level since mid-November, having gained 2.0% so far this month.

“The dollar is absolutely critical,” said James Athey, chief investment officer at Aberdeen Standard Investments in London.

“If the dollar starts to recover, that becomes a problem. It signifies commodity and emerging market weakness and begins to provide a counter-inflationary narrative. “

Oil prices recovered a bit from a 4% drop on Thursday, though they are on track for their third consecutive week of losses on concerns about a further reduction in demand. [O/R]

In addition to Europe, major developing economies like Brazil and India are also struggling with a resurgence in COVID-19 cases.

The market still received some support from concerns about supply disruption, as a container ship stranded in the Suez Canal can block the vital transport route for weeks.

US crude was last up 0.99% at $ 59.14 a barrel and Brent was at $ 62.44, up 0.79%.

Additional information from Katanga Johnson in Washington; edited by Richard Pullin and Ana Nicolaci da Costa


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