Friday, May 03, 2024
Stocks rose Tuesday after a recent streak of losses, though investors' mood remained dimmed by concerns over China's economy and the outlook for US interest rates.
Markets globally have struggled this month on the prospect that the US Federal Reserve will hike borrowing costs once more before the end of the year as it looks to bring inflation to heel.
A string of data out of Washington in recent weeks has indicated the world's top economy remains resilient and the jobs sector tight, even after more than a year of tightening.
However, there are fears that a further turning of the screw could be fatal.
A planned speech this week by Fed Chief Jerome Powell at a gathering of central bankers and business leaders will be closely watched for some guidance on officials' thinking and future policy.
The remarks come as debate swirls among policymakers and investors over whether more work is needed, though some observers say the market has largely priced in another hike.
"Each incremental hike that they have from here just raises the risk that we have a much sharper slowdown in 2024 and perhaps even a recession," Lori Heinel, at State Street Global Advisors, told Bloomberg Television.
However, she added that "as long as inflation remains contained, we think that they will take a pause here".
On Wall Street, the Nasdaq surged more than one per cent thanks to strong buying in big-name tech titans including Amazon, Microsoft and Facebook parent Meta.
The positive lead from New York filtered through to Asia, with markets enjoying a much-needed rally in the afternoon.
Hong Kong surged one per cent after seven straight losses, thanks to a rally in Chinese tech firms.
Shanghai, Tokyo, Sydney, Seoul, Singapore, Wellington, Mumbai, Bangkok, Taipei and Jakarta also advanced.
London, Paris and Frankfurt were also well up in the morning session.
There is still unease among traders about the Chinese economy, with another small cut in interest rates doing little to allay fears of a painful slowdown.
While authorities have pledged a series of measures to get the post-Covid recovery back on track, there has been little detail, and they are facing growing calls to unveil more wide-ranging stimulus.
"There are doubts about the effectiveness of further monetary policy stimulus ability to support sluggish credit demand, with the narrower follow-through from the lending finance rate last week leaving hopes for broader stimulus with fiscal policy," said National Australia Bank's Taylor Nugent.
Adding to the problems are fears about the country's property sector, with a number of major developers including Country Garden and Evergrande on the ropes with vast debts and struggling to meet interest obligations.
"Policy easing announcements intended to invigorate market confidence have fallen short of their desired impact," said SPI Asset Management's Stephen Innes.
He added that while leaders last month promised to take a "fresh perspective" toward the property sector, "subsequent actions taken were only characterised by gradual and incremental measures to ease property-related regulations, limited primarily to select tier-2 and tier-3 cities".
