Asian shares bounce as China moves toward housing growth

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SHANGHAI – Asian stocks jumped on Friday after China cut a key debt benchmark to support a slowing economy, but global equities gauge a record for its longest weekly losing streak amid investor concerns over slower growth.

China cut its five-year loan prime rate (LPR) by 15 basis points on Friday morning, a sharp cut from expectations as authorities seek to overcome the economic downturn by reviving the housing sector. The five-year rate affects the value of the mortgage.

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The broader MSCI index of Asia-Pacific shares outside of Japan was built on initial gains after a sharp cut and ended up more than 1.8%.

European equities were set to follow the lead in Asia, with Pan-Region Eurostocks 50 futures, German Dax futures and FTSE futures up more than 1%.

Chinese blue-chips also rose 1.8%, boosted by overseas purchases, and Hong Kong’s Hang Seng index jumped more than 2%, while Australian shares rose 1.1%. In Tokyo, the Nikkei stock index rose 1.3%.

“While this may not be enough to reverse the growth headwinds in the second quarter, the (cut) forms a step in the right direction so that markets may respond to the expectation of a strong easing in the future,” said Carlos Casanova, senior Asia economist at Union Bankair Privilege in Hong Kong. .

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Despite gains in Asian stocks, MSCI’s All-Country World Price Index has remained in the red for the seventh week in a row, the longest stretch of its kind since its inception in 2001. This will be the longest with back-test data extending to January 1988. .

Concerns over the impact of a broken supply chain on inflation and growth have prompted investors to dump shares, with Cisco Systems Inc falling to an 18-month low on Thursday after warning of continued material shortages, citing the impact of China’s coveted lockdown.

On Friday, China’s financial center in Shanghai shattered residents’ hopes of a smooth end to sanctions as it announced three new COVID-19 cases outside the quarantined area – although plans to end the June 1 citywide long lockdown appear to be on track.

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The city’s industrial production fell more than 60% in April from a year earlier due to the effects of coronavirus restrictions.

“The focus of (Chinese) officials has been on facilitation policies to mitigate the effects of Covid suppression. The problem is that such facilitation policies will have no real impact unless the Covid suppression policy is strictly enforced,” said Christopher Wood, Jefferies’ global head of equities.

Asia gained after a late rally on Wall Street, with the Dow Jones Industrial Average down 0.75%, the S&P 500 down 0.58% and the Nasdaq Composite down 0.26%.

A stronger yuan

In the currency market, the dollar index fell 0.12% from its previous gain to 102.79, heading for its first losing week in seven.

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On the strong side of the flat against the safe-haven yen at 127.76 the move with the dollar was muted. The euro was just over $ 1.0586, erasing previous losses.

China’s coastal yuan has plunged 0.32% to strengthen its two-week high of 6.6699 against the dollar. The more freely traded offshore yuan also reached a two-week high of 6.6855 per dollar.

While long-term U.S. government bond yields have remained high after China’s LPR cuts, reflecting gains in equities, they later moderated.

The U.S. 10-year yield ended 2.855%, flat from Thursday’s close, and down from a peak of 2.922% early Friday. The two-year yield rose 2.6327% compared to the U.S. close of 2.611%.

Crude prices have been falling since the announcement of China’s LPR, but increased due to concerns that demand recovery may subsequently decline.

Brent crude was last down 0.53% at 1 111.45 a barrel and US West Texas Intermediate crude was down 1.21% at $ 110.85 a barrel.

Gold bounced high and was set for its first weekly gain since mid-April on the back of a weaker dollar. Spot gold rose 0.26% to 8 1,846.49 an ounce.

(Reporting by Andrew Galbraith; Editing by Lincoln Feast and Sam Holmes)