The rally rallied losses as doubts about economic growth grew By Reuters


© Reuters. A passer-by wearing a face mask walks past an electrical display showing a graph showing the average Nikkei share of Japan amid the coronavirus pandemic (COVID-19) in Tokyo, Japan, February 24, 2022. REUTERS / Issei Kato / Files

By Tom Westbrook

SINGAPORE (Reuters) – Asian stocks rallied for a fourth straight day on Wednesday, but the recent rally lost momentum as troubling doubts about inflation and a reversal from interest rate hikes overshadowed good news and good news. global development prospects.

MSCI’s broader Asia-Pacific stock index outside Japan rose 0.5% and is in its biggest earnings since February. rose 0.6% and miners pushed Australian stocks up about 0.9% higher.

The gains followed the wave on Wall Street and the fall of the dollar, as investors threw into their minds worries about inflation and recession.

But analysts doubted it could last, and both the dollar and futures contracts remained stable in Asia. fell 0.2%, fell 0.4% while futures remained stable and European futures rose 0.2%.

“After falling last week, stocks could have a further short-term recovery,” said Shane Oliver, chief economist and chief investment strategist at Australia’s AMP (OTC 🙂 Capital.

“But the risks surrounding inflation, monetary tightening, the war in Ukraine and Chinese growth remain high and continue to show a larger decline in stock markets,” he said.

The dollar remained steady after an intermediate boost, aided by forecasts of rising wages in Australia, which fell to just under $ 0.70.

The dollar stabilized in the euro at $ 1.0534 and stopped a strong recovery for sterling at $ 1.2480 which followed stable working data on Tuesday.

Inflation figures for Britain and Canada to be announced later Wednesday could also shift interest rate expectations and move currencies. The index hovered at 103,370.

“It’s still too early to describe the long-term peak of the dollar and the reversals should be shallow,” said Westpac analysts. “But a two-way consolidation between 102-104 is possible in the short term,” they added, citing the dollar index.

NEGATIVE SHOCKS

The positives helped the short-term mood, with US retail sales meeting expectations for a steady rise in April and industrial production exceeding expectations.

Wednesday’s data showed that Japan’s economy shrank less than expected in the first quarter.

Shanghai is also heading towards the end of its prolonged lockdown, and China’s vice president has made soothing remarks to techies as the latest sign of a declining pressure.

However, any good news was offset by a reminder from Federal Reserve Chairman Jerome Powell that controlling inflation would require interest rate hikes and possibly some pain.

Investors have priced interest rates up 50 basis points in the US in June and July and see the Fed’s core interest rate fall 3% early next year.

Bonds of all tenors were sold on Tuesday in anticipation of rising interest rates, but the yield gap between short-term and long-term bonds is narrowing as market prices risk rises this year to slow long-term growth.

The 10-year benchmark bonds remained stable in Asia and the yield was just under 3% at 2.9805%.

European yields are also rising as the European Central Bank says a 50 basis point hike should not be ruled out.

Commodities rallied with stocks this week as markets found reasons to hold on to growth expectations, but oil fell on Tuesday and there were signs of a downtrend on Wednesday.

Futures rose 0.7% to $ 112.73 a barrel and futures rose 1.2% to $ 113.83 a barrel.

S&P Global (NYSE 🙂 Ratings cut growth forecasts for China, the United States and the eurozone.

“The global economy continues to experience an unusually large number of negative shocks,” said lead economist Paul F. Gruenwald.

“Two developments have changed the macroeconomic picture,” he said, which is Russia’s invasion of Ukraine that has led to a sharp rise in commodity prices and inflation, which has proved to be higher, broader and more persistent than initially thought.

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