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Stocks in Asia come off highs on growth worries: markets wrap

Stocks in Asia come off highs on growth worries: markets wrap
Pedestrians in Pudong's Lujiazui Financial District in Shanghai, China, on Monday, 20 June 2022. (Photo: Qilai Shen/Bloomberg)

Concerns about a darkening economic outlook amid high inflation and tightening monetary policy hampered stocks in Asia on Wednesday.

MSCI’s Asia-Pacific share index rose less than 0.5%, spanning a climb in Japan and a drop in China. S&P 500 and Nasdaq 100 futures fluctuated while European contracts edged higher. 

The US stock market had posted a small gain on Tuesday, helped by robust earnings from Walmart and Home Depot. Company profits have encouraged an equity rebound from June lows but are at risk of weakening as monetary settings tighten to fight price pressures. 

Oil stabilised but was still in sight of a more than six-month low, underlining some of those concerns over the economic growth outlook. Treasury yields and the dollar were steady, while gold and Bitcoin wavered.

In New Zealand, the central bank raised borrowing costs by a half-point as expected and said it remains appropriate to continue tightening at pace to curb inflation. The local currency strengthened.

The revival in stocks from bear-market lows is in part a contentious bet that inflation and central bank hawkishness are peaking, making a recession less likely. The latest Federal Reserve minutes on Wednesday will shed more light on whether those wagers are right.

“We expect the FOMC [Federal Open Market Committee] minutes to have a hawkish tilt,” Carol Kong, strategist at Commonwealth Bank of Australia, wrote in a note. “We would not be surprised if the minutes show the FOMC considered a 100 basis points increase in July.”

The latest US data were patchy. Home construction fell more than expected, while factory output increased in July for the first time in three months.

In China, where challenges from a property-sector slump and Covid curbs are multiplying, Premier Li Keqiang asked local officials from six key provinces that account for 40% of the economy to bolster pro-growth measures. 

Inflation remains the most closely-watched indicator in the second half. BM


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