July 6, 2022

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Stocks recover even as inflation fears persist

Stocks recover even as inflation fears persist

Empty prices are displayed in the stock price panels of the Tokyo Stock Exchange (TSE) after the Tokyo Stock Exchange 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 (Reuters) – Asian stocks led a global rally on Tuesday on optimism about easing China’s strict measures against technology and COVID-19, but concerns about rising prices around the world set off a nervous tone in markets as investors wait. More signals from policy makers.

European stocks followed the positive start in Asia, with the STOXX index of the 600 largest stocks in Europe (.stoxx) It rose 0.62% and US stock futures, S&P 500 e-minis, signaled that Wall Street would follow suit.

MSCI’s broadest index of Asia Pacific shares outside Japan (.MIAPJ0000PUS.) It rose 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 if we take the S&P 500 as a guide, it looks like the US will rise by about 1% … but looking to the future markets remain focused on inflation and rate hikes,” said Philip Shaw, chief economist. At Investec in London.

“Headlines focus on high inflation pressures either caused directly by the conflict in Ukraine, or supply chain shortages caused in part by the lockdowns in China,” he said.

It was hopes that the latter would ease up that fueled the positive mood in stocks early Tuesday.

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

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

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

In Tokyo, the Nikkei (.N225) It rose 0.33% in afternoon trade, while Australia’s S&P/ASX200 rose (.AXJO) The index rose 0.25%.

China Mainland Index CSI300 (.CSI300) It rose 0.95% while Hong Kong’s Hang Seng Index rose (.HSI) It was 2.35% higher, as tech companies were listed in the city (.HSTECH) It jumped more than 4% in hopes of easing Beijing’s crackdown on the sector.

growth concerns

Despite the moderate recovery in stocks, however, there were tense signs elsewhere as economic growth concerns in the world’s two largest economies re-emerged after weak retail sales, factory production numbers in China and disappointing US manufacturing data. Read more.

The New York Fed’s Empire State Manufacturing Index, published on Monday, showed a surprising drop during May and shipments fell at the fastest pace since the pandemic began. Read more

The yield on the benchmark 10-year Treasury rose to 2.9203% compared to Monday’s close in the United States at 2.879%, while the two-year bond yields, which rose as traders expected to raise the federal funds rate, rose to 2.6153%.

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Investors will look to a slew of central bank policymakers speaking on Tuesday for more clues about the timing of interest rate hikes to combat inflation.

US Federal Reserve Chairman Jerome Powell is scheduled to speak at 1800 GMT, European Central Bank President Christine Lagarde and Bank of England Deputy Governor John Cunliffe are scheduled to speak.

Futures markets are pricing in consecutive increases of 50 basis points in June and July and for the benchmark interest rate in the US to reach 2.75% by the end of the year. However, there is a growing expectation that other central banks will be catching up.

The US Dollar Index, which measures the greenback against a basket of currencies, fell 0.23% to 103.9 as investors cashed in and scaled back their bets on a US interest rate hike leading to further gains. Read more

The European single currency was up 0.3% on the day at $1,046, after losing 0.96% in one month.

Likewise, investors took profits from the recent surge in oil prices, sending prices lower on Tuesday after Hungary resisted European Union efforts to impose a ban on Russian oil imports, a move that would reduce global supply.

US crude fell 0.36 percent to $113.79 a barrel. Brent crude fell to 114.12 dollars.

Gold prices strengthened, as the decline in the dollar bolstered demand for bullion priced in US dollars and faced pressure from the recovery in US Treasury yields. Spot gold was up 0.1% at $1,825.44 an ounce.

Additional reporting by Scott Murdoch in Hong Kong. Editing by Lincoln Fest, Kirsten Donovan

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