Asia markets cautious over China growth news

On Tuesday, Asian stocks were digesting concerns about China’s economy and rising interest rates in the United States, with Hong Kong falling significantly and Japan edging higher on the strength of a falling yen.

On Monday, China’s GDP estimates for the first quarter of 2022 beat predictions, but the government warned of “severe problems” ahead, citing Covid-19 lockdowns in key economic hubs.

Millions of inhabitants in Shanghai’s financial centre are still confined to their homes, as supply lines have been shut off by restrictions that have also affected Shenzhen, China’s innovation hub, and Jilin, the northeastern grain basket.

Investors were left weighing whether attempts to lift the economy by Chinese policymakers — who have held off cutting interest rates — would offset Beijing’s zero-Covid policies.

“The focus in Asia is on mainland policy easing to cushion the impact of lockdowns,” Stephen Innes at SPI Asset Management said, adding that while first-quarter growth was marginally better than predicted, “there was no positive follow-through in China-sensitive assets”.

“Reopening cities is the only fix to drive credit growth, which could translate into a sustainable economic rebound that supports equity markets and a load of other China proxy assets,” he said.

The Nikkei 225 index of Japan rose marginally, leading most Asian markets higher, with South Korea, Taiwan, India, and Australia all advancing.

However, following a four-day holiday break, Hong Kong’s stock fell by the most in three weeks, owing to fears over Beijing’s severe tech-sector rules and China’s overall development.

The Hang Seng Index fell more than 2.7 percent to close at 2.28 percent lower, while the Shanghai Composite Index also fell.

Investors were also watching the impact of monetary policy tightening in the United States to combat inflation, with major European markets in London, Paris, and Frankfurt starting trading in the red on Tuesday after a long holiday vacation.

Based on inflation concerns, pandemic lockdowns in China, and the war in Ukraine, the World Bank last week downgraded its forecast for global growth this year, and the IMF is expected to do the same when it releases its updated forecasts on Tuesday.

“Its current estimate for 2022 is 4.4 percent which it set in January, with Europe and Central Asia likely to take the brunt, due to the Russian war in Ukraine, and Covid restrictions, respectively,” said Michael Hewson, chief market analyst at CMC Markets UK.

“With the return of European markets from the long Easter weekend break we look set to get off to a negative start in the wake of yesterday’s lower finish for US markets, amidst concerns that the growth downgrades seen yesterday could well be the first of many.”

Meanwhile, oil prices fell after initial gains on Tuesday, after Libya’s National Oil Corporation announced the closure of operations after staff in the key export terminal of Zueitina and the Al-Sharara oil field were blocked from working.

The move will prevent Libya from exporting almost a quarter of its 1.2 million barrels per day of production.

And the Japanese yen plunged to yet another 20-year low on Tuesday, reaching 128 to the dollar, a reflection of the continued accommodation of Japan’s monetary policy while US policymakers move to hike interest rates.

“Although the effects of the lower JPY are a net positive for the Japanese economy, positive effects from higher export volume and an increase in inbound foreign tourists have waned and effectively gone,” UBS said in a note.

“More importantly, negative effects are mainly borne by households with negative real income and domestic-oriented industries (mainly small firms) with higher import costs.”

– Key figures around 0830 GMT –
Tokyo – Nikkei 225: UP 0.69 percent at 26,985.09 (close)

Shanghai – Composite: DOWN 0.05 percent at 3,194.03 (close)

Hong Kong – Hang Seng Index: DOWN 2.28 percent at 21,027.76 (close)

Euro/dollar: UP at $1.0811 from $1.0802

Pound/dollar: UP at $1.3033 from $1.3023

Euro/pound: UP at 82.94 pence from 82.87

Dollar/yen: UP at 128.35 yen from 126.54 yen

Brent North Sea crude: DOWN 0.76 percent at $112.30 per barrel

West Texas Intermediate: UP 1.03 percent at $107.09 per barrel

New York – Dow: DOWN 0.1 percent at 34,411.69 (close)

London – FTSE 100: DOWN 0.10 percent at 7,608.33