Shanghai (Reuters) – Asian stocks went up early on Friday after China cut a key lending benchmark to help a slowing economy. However, a measure of global stocks is still on track for its longest weekly losing streak ever as investors worry about slowing growth.
China cut its five-year loan prime rate (LPR) by 15 basis points on Friday morning. This was a bigger cut than most people expected, and it shows that the government is trying to stop the economy from slowing down. The one-year LPR, however, stayed the same. The five-year rate affects how much a mortgage costs.
Most people who took part in a Reuters poll thought that both rates would be cut by 5 basis points.
After the cut, MSCI’s broadest index of Asia-Pacific stocks outside of Japan quickly added to its early gains and was last up 1.4%.
In early trading, Chinese blue chips were up 1.1%, and the Hang Seng index in Hong Kong jumped more than 2%. Australian shares went up 1.3%. The Nikkei stock index went up by 1% in Tokyo.
“It won’t be enough to turn around growth headwinds in Q2, but (the cut) is a step in the right direction,” said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong. “The markets may be reacting to the expectation of stronger easing going forward.”
Even though Asian shares went up, MSCI’s All-Country World Price Index was still on track to have its seventh straight week in the red. This was the longest losing streak since the index began in 2001. It would also be the longest if test data from January 1988 were used.
Investors are selling shares because they are worried about how broken supply chains will affect inflation and growth. On Thursday, Cisco Systems Inc (NASDAQ:CSCO) fell to a low not seen in 18 months after it warned of persistent component shortages caused by China’s COVID lockdowns.
On Friday, China’s financial center, Shanghai, said that there were three new COVID-19 cases outside of quarantined areas. This made it harder for the city to get out of its strict lockdown, which has been going on for weeks.
“The main goal of (Chinese) leaders has been to come up with policies that make COVID suppression less harmful. The problem is that these kinds of policies won’t make much of a difference as long as the COVID suppression policy is strictly followed “Christopher Wood, the head of global equities at Jefferies, said that.
After a late rally on Wall Street fizzled out, stocks in Asia went up. The Dow Jones Industrial Average was down 0.75 percent, the S&P 500 was down 0.58 percent, and the Nasdaq Composite was down 0.26 percent.
After China cut its LPR, U.S. government bond yields went up, which was similar to the change in risk appetite in stocks.
The yield on a 10-year U.S. bond was last at 2.8677 percent, up from 2.855 percent on Thursday. The yield on a 2-year U.S. bond went up to 2.6364 percent from 2.611 percent on Thursday.
The safe-haven yen fell against the dollar on currency markets, sending the dollar index up 0.08 percent to 102.99. At last check, the dollar was up 0.23 percent against the yen, and the euro was down 0.14 percent to $1.0571.
China’s onshore yuan fell by a quarter of a percent to 6.726 per dollar, and the more freely traded offshore yuan fell past 6.74 per dollar.
Oil prices stayed low because people were worried about the economy, but crude prices stopped falling after China announced its LPR. Brent crude was down 0.37 percent to $111.63 per barrel, and U.S. West Texas Intermediate crude was down 0.19 percent to $112 per barrel.
Spot gold went down, dropping by 0.2% to $1838 per ounce. [GOL/]
