Stocks are rising as doubts about economic growth rise

By Tom Westbrook

SINGAPORE (Reuters) – Asian stock markets marked their fourth consecutive session of gains on Wednesday, but the recent rally lost momentum as obsessive concerns about inflation and deviations from rising interest rates overshadowed parts and parts of good news prospects for growth.

MSCI’s broadest Asia-Pacific equity index outside Japan rose 0.5 percent and is in its longest winning streak since February. rose 0.6% and miners put Australian stocks about 0.9% higher.

Profits followed the Wall Street jump and the dollar fell as investors pushed inflation and recession worries back into their minds.

But analysts doubted that this could continue, and both greenbacks and futures stabilized in Asia. fell 0.2%, fell 0.4%, while futures were fixed and European futures rose 0.2%.

“After sinking last week, stocks may have a further rebound in the short term,” said Shane Oliver, chief economist and head of investment strategy at Australia’s AMP (OTC 🙂 Capital.

“But the risks of inflation, tightening monetary policy, the war in Ukraine and China’s growth remain high and still point to even worse sides of stock markets,” he said.

The dollar remained stable after a one-night stand, helped by a lack of forecasts for wage growth in Australia, which brought the dollar short below $ 0.70.

The dollar stabilized against the euro at 1.0534 dollars and stopped the strong rebound of sterling at 1.2480 dollars, which followed solid data on labor on Tuesday.

Inflation data in the UK and Canada, expected later on Wednesday, could also change interest rate expectations and move currencies. It hovered at 103,370.

“It is still too early to announce a long-term peak of the dollar and the correction should be shallow,” said analysts at Westpac. “But some two-way consolidation between 102-104 is probably short-lived,” they added, citing the dollar index.

NEGATIVE SHOCKS

The positive data helped the short-term mood, with US retail sales meeting forecasts for a solid increase in April and industrial production exceeding expectations.

Wednesday’s data showed that Japan’s economy contracted less than expected in the first quarter.

Shanghai is also nearing the end of its long-running blockade, and China’s deputy prime minister has made reassuring comments to technology leaders at the latest sign of easing pressure.

However, any good news was offset by a reminder from Federal Reserve Chairman Jerome Powell that controlling inflation would require rising interest rates and possibly some pain.

Investors have estimated a 50-point rise in US interest rates in June and July and see the Fed’s reference interest rate on the funds increase by 3% by early next year.

Bonds of all securities were sold on Tuesday in anticipation of rising interest rates, but the yield gap between short-term and long-term bonds is narrowing as markets value the risk that increases this year will hamper long-term growth.

The 10-year reference bonds were stable in Asia, yielding just under 3% at 2.9805%.

Yields in Europe are also rising as the European Central Bank says a 50-point increase in interest rates should not be ruled out.

Commodities rose with stocks this week as markets found reasons to keep up their hopes for growth, but oil fell on Tuesday and showed signs of declining momentum on Wednesday.

futures rose 0.7% to $ 112.73 a barrel and futures rose 1.2% to $ 113.83 a barrel.

S&P Global (NYSE 🙂 ratings downgrade growth forecasts for China, the United States and the euro area.

“The global economy continues to face an unusually large number of negative shocks,” said chief economist Paul F. Grunwald.

“Two events have changed the macro picture,” he said, as Russia’s invasion of Ukraine led to soaring commodity prices and inflation that turned out to be higher, broader and more sustained than previously thought.