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Asian stocks bounce as China moves to increase housing

FILFOTO – An investor stands in front of an electronic board showing stock information at a brokerage house in Shanghai, China, August 24, 2015. REUTERS / Aly Song

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  • MSCI Asia ex-Japan +1.8%, Nikkei +1.3%
  • European equities will follow Asia’s leadership
  • Shares rise after China cuts prime interest rates on loans
  • Global stocks are set at 7th weekly losses

SHANGHAI, May 20 (Reuters) – Asian equities rose Friday after China cut a key lending benchmark to support a declining economy, but a benchmark for global equities remained set for its longest weekly losing streak on record, amid investors’ concerns about weakness growth.

China cut its five-year prime interest rate on loans (LPR) by 15 basis points on Friday morning, a sharper cut than expected, as the authorities try to curb an economic downturn by reviving the housing sector. The five-year interest rate affects the pricing of mortgages. read more

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

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

Chinese blue chips also rose 1.8%, strengthened by foreign purchases, and Hong Kong’s Hang Seng Index (.HSI) jumped more than 2%, while Australian equities (.AXJO) rose 1.1%. In Tokyo, the Nikkei stock index (.N225) rose 1.3%.

“While it will certainly not be enough to turn growth in headwinds in Q2, the (cut) is a move in the right direction so that markets can respond to expectations of stronger easing going forward,” said Carlos Casanova, senior Asian economist. and Union Bancaire Privee in Hong Kong.

Despite the rise in Asian equities, MSCI’s world price index for all countries (.MIWD00000PUS) remained heading for its seventh consecutive week in the red, the longest such stretch since its inception in 2001. It would also be the longest including retested data until January 1988. .

Concerns over the impact of ill-treated supply chains on inflation and growth have led investors to dump stocks, with Cisco Systems Inc (CSCO.O) falling to a low of 18 months on Thursday after warning of persistent component shortages, citing the impact of China’s COVID shutdowns. read more

On Friday, China’s economic hub in Shanghai shattered residents’ hopes for a steady end to the restrictions when it announced three new COVID-19 cases outside quarantine areas – although plans to end an extended urban closure on June 1 appeared to remain in place. route. read more

Industrial production in the city shrank by more than 60% in April from the previous year due to the impact of coronavirus restrictions. read more

“The focus of (Chinese) officials has been to come up with mitigation policies to mitigate the impact of COVID repression … The problem is that such mitigation policies will have no real impact as long as COVID repression policies are strictly enforced,” said Christopher Wood, global action manager in Jefferies.

The gains in Asia came after a late rally on Wall Street disappeared, lowering the Dow Jones Industrial Average (.DJI) by 0.75%, the S&P 500 (.SPX) 0.58% lower and the Nasdaq Composite (.IXIC) down by 0 , 26%.


In the foreign exchange market, the dollar index retreated from small previous gains to push down 0.12% to 102.79, heading for its first loss week of seven.

Movements elsewhere were subdued, with the dollar only on the stronger side of flat against the safe harbor yen of 127.76. The euro was barely higher at $ 1.0586, which erased previous losses.

China’s land-based yuan recorded larger movements, turning from a 0.32% decline to strengthening to a two-week high of 6.6699 per dollar. The more freely traded offshore yuan also reached a two-week high of 6.6855 per dollar.

While longer-term US government bond yields ticked higher after China’s LPR cuts, which reflected a rise in equities, they moderated later.

The US 10-year interest rate was last at 2.855%, flat from the end of Thursday, and down from a peak of 2.922% earlier on Friday. The two-year return rose to 2.6327% compared to a US end of 2.611%.

Crude oil prices reduced losses following China’s LPR announcement, but later widened declines due to concerns that an improvement in demand could falter.

Brent oil was down 0.53% to $ 111.45 a barrel and US West Texas Intermediate oil was 1.21% lower at $ 110.85 a barrel.

Gold jumped higher and was set for its first weekly rise since mid-April, helped by the weaker dollar. Spot gold, up 0.26% to $ 1,846.49 per ounce.

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Reporting by Andrew Galbraith; Editing Lincoln Feast and Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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