Asian stocks went up sharply on Friday and were on track for their first weekly gain in a month. This was due to renewed hopes that China would loosen its strict COVID rules, which boosted riskier assets.
MSCI’s broadest index of Asia-Pacific shares outside of Japan was up 2.07% on the day, with China’s stock market going up 2% and Hong Kong’s Hang Seng Index going up almost 6%.
Related: A Asian Trade poll predicts that China’s exports will drop even more in October as global demand falls.
The Hong Kong index was about to have its biggest weekly gain in more than a decade.
European stock futures showed that stocks would go up. The Eurostoxx 50 futures went up 0.67 percent, the German DAX futures went up 0.45 percent, and the FTSE futures went up 0.63 percent.
Kenny Ng, a securities strategist at China Everbright (OTC:CHFFF) Securities in Hong Kong, said that the market was mostly driven by growing hopes that China will ease its zero-COVID policy and the need for a technical rebound. He also said that the rebound is more likely to be short-term because the fundamentals haven’t changed.
A report from Bloomberg that the first U.S. inspections of audit papers at Chinese companies listed in the U.S. were done early also made people feel better. This gave people hope that the U.S. officials were happy. The auditing issue is just one of many things that have made Sino-U.S. ties worse. financial ties.
Stocks in Hong Kong and China have changed a lot this week. On Tuesday, rumours spread on social media based on an unconfirmed note that China was going to loosen COVID restrictions in March. At the time, a spokesman for the Chinese foreign ministry said he didn’t know what was going on.
Anti-virus restrictions have hurt the Chinese economy a lot and made the global slowdown worse. Even though there are more rumors, most analysts don’t expect COVID containment measures to change much until at least the winter, if not longer.
Since Fed Chair Jerome Powell said on Wednesday that it was “very premature” to think about stopping rate hikes, global stocks have been shaken. This has put an end to any investor hopes of a near-term pivot.
“Chair Powell removes the punchbowl yet again, in response to a tiny bit of partying,” Citi analysts said, referring to the past few days rise in equities over hopes of a change in tone from the central bank.
“The sensitivity of the Fed to improving financial conditions is seemingly quite high and we think is likely to remain so while inflation is too high for its liking,” Citi added, noting that it was not a good set up for risky assets.
Investors will be keeping an eye on Friday’s U.S. payrolls report where any upside surprise will likely reinforce the Fed’s hawkish outlook. Economists polled by Reuters expect nonfarm payrolls to have increased by 200,000 jobs in October.
In the currency market, sterling was up 0.38% at $1.1207, after sliding 2% overnight when the Bank of England raised interest rates by the most since 1989, but warned a long recession looms.
The U.S. dollar index, which measures the greenback against a basket of currencies, fell 0.292%, after surging 0.8% overnight and touching a roughly two-week high of 113.15.
When it comes to commodities, oil prices made up for early losses. [O/R]
Related: The Fed’s hawkish stance hurts Asian stocks, and China’s rally stops.
U.S. crude recently rose 2.28% to $90.18 per barrel and Brent was at $96.62, up 2.06% on the day.
Gold prices regained some ground on Friday as a slight pullback in the dollar helped alleviate some pressure. Spot gold added 1.1% to $1,646.89 an ounce.
