Stocks rally even as inflation fears linger

Pristine prices are displayed on the stock quotation boards of the Tokyo Stock Exchange (TSE) after the TSE temporarily suspended all trading due to system problems in Tokyo, Japan October 1, 2020. REUTERS/Issei Kato/Files

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LONDON/HONG KONG, May 17 (Reuters) – Asian stocks led a global rally on Tuesday on optimism about an easing of China’s crackdown on technology and COVID-19, but worries about rising prices in around the world set the markets on edge as investors wait for more signals from policymakers.

European stocks followed the positive start in Asia, with the STOXX index of Europe’s largest 600 stocks (.STOXX) up 0.62% and US equity futures, S&P 500 e-minis, suggesting that Wall Street would follow.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) gained 1.5% on Tuesday, but the index is still down 6.4% so far this month.

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“There was a good session in Asia and, taking the S&P 500 as a guide, the US should be up around 1%…but looking ahead, markets remain obsessed with inflation and rate hikes,” said Philip Shaw, chief economist. at Investec in London.

“Headlines focus on higher inflationary pressures resulting directly from the conflict in Ukraine, or supply chain shortages resulting in part from lockdowns in China,” he said.

Hopes that the latter might fade had created a positive mood in stocks early Tuesday.

Shanghai has passed the long-awaited milestone of three consecutive days with no new COVID-19 cases outside quarantine zones, which could lead to the start of the lifting of restrictions. Read more

Meanwhile, Chinese Vice Premier Liu He is due to speak at a meeting on Tuesday with technology leaders aimed at promoting the development of the digital economy, people familiar with the matter told Reuters. Read more

The meeting is being watched closely for remarks by Liu and others for clues about how far Chinese authorities will go in easing a regulatory crackdown since late 2020 on the previously high-flying tech sector.

In Tokyo, the Nikkei (.N225) rose 0.33% in afternoon trading, while in Australia, the S&P/ASX200 index (.AXJO) gained 0.25%.

Mainland China’s CSI300 index (.CSI300) gained 0.95% while Hong Kong’s Hang Seng index (.HSI) rose 2.35% as city-listed tech companies (.HSTECH ) surging more than 4% on hopes of Beijing’s crackdown on the sector. To be relaxed.


Despite the modest rally in stocks, however, there were signs of jitters elsewhere as fears for economic growth in the world’s two largest economies resurfaced following weak retail sales and data. factory production in China and disappointing manufacturing data in the United States. Read more .

The New York Fed’s Empire State Manufacturing Index released on Monday showed a sharp drop in May and shipments fell at their fastest rate since the start of the pandemic. Read more

The yield on the benchmark 10-year Treasuries rose to 2.9203% from its U.S. close on Monday at 2.879%, while two-year yields, which rise on traders’ expectations of higher federal funds rate, reached 2.6153%.

Investors will look to a series of central bank policymakers speaking on Tuesday for further signs of the timing of rate hikes to fight inflation.

Scheduled speakers include US Federal Reserve Chairman Jerome Powell at 18:00 GMT, European Central Bank President Christine Lagarde and Bank of England Deputy Governor Jon Cunliffe.

Futures markets are pricing in consecutive increases of 50 basis points in June and July and the benchmark US interest rate reaching 2.75% by the end of the year. However, there are growing expectations that other central banks will catch up.

The US dollar index, which tracks the greenback against a basket of currencies, fell 0.23% to 103.9 as investors cashed in and reduced bets on US rate hikes generating new earnings. Read more

Europe’s single currency rose 0.3% on the day to $1.046, after losing 0.96% in a month.

Investors also took advantage of a recent oil rally, pushing prices lower on Tuesday after Hungary resisted pressure from the European Union for a ban on Russian oil imports, a move that would tighten global supply.

U.S. crude fell 0.36% to $113.79 a barrel. Brent crude fell to $114.12.

Gold prices firmed as the weaker dollar supported demand for bullion at the greenback price and countered pressure from the recovery in US Treasury yields. Spot gold traded up 0.1% at $1,825.44 an ounce.

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Additional reporting by Scott Murdoch in Hong Kong; Editing by Lincoln Feast, Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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