HONG KONG – Asian stocks rose on Monday after a rally on Wall Street last week, but analysts say fears of a recession due to soaring inflation and supply chain problems linked to the COVID still worries investors.
Global markets have been volatile for much of 2022, fueled by uncertainty over supply chain groans due to Chinese lockdowns, inflationary pressures and European anxiety over the war in Ukraine. .
Wall Street stocks closed with a strong rally on the tech-heavy Nasdaq on Friday after a tumultuous week that saw markets fluctuate on U.S. inflation data and a continued slump in Chinese exports. powered by the country’s zero-Covid policy.
“The market continues to trade on very short-term recession signals. It is very ‘noisy’, maintaining high intraday volatility with swings of 150-250 points (being) common,” said Stephen Innes of SPI Asset Management.
“Indeed, it is the mark of a market filled with air pockets that have left more than a few investors licking their wounds.”
One of the main drivers of volatility is China’s continued lockdown. Shanghai’s economic engine, in particular, has been under strict virus restrictions since April, closing factories and suspending port activity.
Beijing’s unwavering adherence to its zero Covid strategy has reverberated around the world, rumbled through global supply chains, rattled commodity prices and stoking investor fears.
China’s National Bureau of Statistics said on Monday retail sales fell 11.1% – the lowest since March 2020 – and its industrial output also fell 2.9% year-on-year.
But there was good news over the weekend, with Shanghai’s vice mayor announcing that a gradual reopening of businesses in the city would begin “in stages” from Monday.
Analysts at investment bank Charles Schwab said “global sentiment appears to be easing” even at the suggestion of easing.
Asian markets opened Monday with generally positive performance, with Tokyo, Sydney, Singapore and Manila rising throughout the day.
But in Hong Kong and Shanghai, actions were more mixed.
Economist Clifford Bennett of ACY Securities said “there is a very real risk, even probability, of a Northern Hemisphere triple recession in the US, Europe and China simultaneously and virtually immediately.”
He added that all eyes will be on how the Federal Reserve acts in the coming months, particularly whether it tightens monetary policy further to combat soaring inflation.
“Regardless of the Fed’s action – aggressive or soft, expect a decline in stock values overall,” Bennett said.
Key figures around 03:00 GMT
Hong Kong – Hang Seng Index: DOWN 0.2% to 19,852.93
Shanghai – Composite: DOWN 0.3% to 3,076.10
Tokyo – Nikkei 225: UP 0.2% to 26,492.29 (pause)
North Sea Brent: 1.3% down to $110.16 a barrel
West Texas Intermediate: 1.2% drop to $109.22 a barrel
Euro/dollar: DOWN to $1.0396 from $1.0417 at 9:30 p.m. GMT on Friday
Pound/dollar: DOWN to $1.2244 vs. $1.2262
Euro/pound: DOWN to 84.91 pence vs. 84.92 pence
Dollar/yen: DOWN to 128.88 yen against 129.19 yen
New York – Dow: UP 1.5% to 32,196.66 (closing)
London – FTSE 100: UP 2.6% to 7,418.15 (closing)
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