Asia stocks up but investors worry about rate hikes

Hong Kong, May 25 (BNA): Asian shares rose on Wednesday despite central banks massively raising interest rates to combat soaring inflation and leaving investors wary of slowing global growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.72%, with Australian shares up 0.72%, Seoul’s up 0.84% ​​and Taiwan up 1.07%, Reuters reports.

The Hang Seng indices in Hong Kong and China were also trading higher, while the Japanese Nikkei average fell 0.04%.

European markets also looked poised for a firmer open, with pan-European futures up 0.93% and FTSE 100 futures up 0.88%.

The US dollar index – which measures the currency against six major competitors – rose 0.16% to 101.92, a level not seen since April 26. Meanwhile, the kiwi hit a three-week high of $0.65 after the Reserve Bank of New Zealand aggressively raised interest rates. 50 basis points and more to come.

Overnight, Wall Street was bogged down by weak housing and manufacturing data, while US central bankers backed two massive interest rate increases in early June and July to fight 40-year high inflation.

The Nasdaq Composite fell 2.35% and the S&P 500 lost 0.81%.

US new home sales fell 16.6% month-on-month in April, the biggest drop in nine years, sending US Treasury yields to their lowest in one month as investors again turned to safety. The benchmark 10-year note had a 2.766% yield and a 2-year yield of 2.522%.

But Atlanta Fed President Rafael Bostic warned that large rate increases could lead to “major economic disruption” and was among a group of Fed policymakers who favored slower rate hikes later in the year if inflation subsides.

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Investors in Asia remain similarly concerned about growth being affected by the effects of the ongoing Chinese shutdown of COVID-19, which threatens to undermine recent stimulus measures in the world’s second largest economy.

“In Asia, the debate among investors is centered on whether or not China’s easing policies are sufficient to offset downward pressures,” Stephen Innes of SPI Asset Management said in a note.

“Fiscal complications will be minimal in an economy where economic activity has slowed sharply. Bypassing mobility restrictions in a short time is a prerequisite, but not a guarantee, for an Asian-led economic recovery.”

Gold prices slipped 0.19% to $1,862.27 an ounce, after rising to a two-week high on Tuesday, with the dollar gaining.

Oil prices rose more than 1% on the possibility of tight supplies. US crude futures rose to $111.05 a barrel, and Brent rose to $114.86.

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