Asian stocks rebound as China moves to boost housing

FILE PHOTO – An investor stands in front of an electronic board displaying stock information at a brokerage house in Shanghai, China, August 24, 2015. REUTERS/Ali Song

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  • MSCI Asia excluding Japan +1.8%, Nikkei +1.3%
  • European stocks are set to follow in Asia
  • Stocks rise after China cuts key loan rate
  • Global stocks are preparing for the seventh weekly loss

SHANGHAI (Reuters) – Asian stocks jumped on Friday after China cut a key lending benchmark to support a sluggish economy, but a gauge of global stocks remained set for its longest-ever streak of weekly losses amid investor concerns about slowing growth.

China cut its five-year loan base rate (LPR) by 15 basis points on Friday morning, a sharper cut than expected, as authorities seek to mitigate an economic slowdown by reviving the housing sector. The five-year rate affects the pricing of mortgages. Read more

MSCI’s broadest index of Asia Pacific shares outside Japan (.MIAPJ0000PUS) quickly built on early gains after the cut and was last up more than 1.8%.

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European stocks were set to follow Asia’s lead, with region-wide Euro Stoxx 50 futures, German DAX futures and FTSE futures up more than 1%.

Chinese blue-chip stocks also rose 1.8%, supported by foreign buying, Hong Kong’s Hang Seng (.HSI) jumped more than 2%, while Australian shares (.AXJO) rose 1.1%. In Tokyo, the Nikkei (.N225) rose 1.3%.

“While it will certainly not be enough to reverse growth headwinds in the second quarter, (the cut) is a move in the right direction, so markets may react to expectations of a stronger easing,” said Carlos Casanova, chief Asia economist at Union Bancaire Privee. In the future”. in Hong Kong.

Despite gains in Asian stocks, the MSCI All Nations World Price Index (. . . stretching until January 1988.

Concerns about the impact of troubled supply chains on inflation and growth prompted investors to dump stocks, with Cisco Systems Inc (CSCO.O) on Thursday slumping to an 18-month low after it warned of persistent component shortages, citing the impact of China. COVID insurances. Read more

On Friday, China’s financial hub Shanghai rattled residents’ hopes for a smooth end to restrictions as it announced three new cases of COVID-19 outside quarantine areas — although plans to end a prolonged citywide lockdown on June 1 appear to be still on the right track. . Read more

Industrial production in the city contracted by more than 60% in April compared to the previous year due to the impact of the coronavirus restrictions. Read more

“The focus of (Chinese) officials has been on coming up with mitigating policies to mitigate the impact of the suppression of COVID … The problem is that these easing policies will not have any real effect as long as the policy of suppressing COVID is tightly enforced,” said Christopher Wood, global head of equities at Jefferies.

Gains in Asia came after a late rally on Wall Street faded, leaving the Dow Jones Industrial Average (.DJI) down 0.75%, the S&P 500 (.SPX) down 0.58% and the Nasdaq Composite (.IXIC) down 0.26%.

strongest yuan

In the currency market, the dollar index pulled back from its previous small gains to fall 0.12% to 102.79, heading into its first losing week in seven days.

Moves elsewhere were muted, with the dollar on the stronger side of stability against the safe-haven yen at 127.76. The euro was barely higher at $1.0586, erasing earlier losses.

The inland Chinese yuan made bigger moves, turning from a decline of 0.32% to a two-week high of 6.6699 per dollar. The most traded offshore yuan also hit a two-week high of 6.6855 per dollar.

While long-term US government bond yields rose after the Chinese LPR price cut, reflecting gains in equities, they subsequently eased.

The yield on the 10-year US Treasury was last at 2.855%, flat from Thursday’s close, and down from a high of 2.922% earlier on Friday. The two-year yield rose to 2.6327% compared to the US close of 2.611%.

Crude oil prices pared their losses after the Chinese LPR announcement but later extended their losses on fears of faltering demand.

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

Gold bounced higher and was on track for its first weekly gain since mid-April, buoyed by dollar weakness. Spot gold rose 0.26% to $1,846.49 an ounce.

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(Reporting by Andrew Galbraith) Editing by Lincoln Fest and Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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