Asia shares rise on optimism about easing Covid restrictions

This could also be driven by expectations the US may decide to cut Chinese tariffs

Photo: AP
Photo: AP


Published: Tue 5 Jul 2022, 11:30 AM

Asian shares advanced Monday across the board as buying set in after the lull of a US national holiday.

Analysts said the optimism may be driven by expectations the US may decide to cut Chinese tariffs, a welcome move that would also help tame inflation.

China’s Commerce Ministry said Tuesday that Vice Premier Liu He spoke with Treasury Secretary Janet Yellen about coordinating economic policy between the two biggest economies and maintaining the stability of supply chains.

In a statement, it also said the Chinese side “expressed its concern over issues such as the removal of additional tariffs and sanctions imposed by the United States on China and fair treatment of Chinese companies.” The two sides agreed to continue their discussions, it said.

Investors also have been encouraged by the lifting of restrictions related to the coronavirus pandemic across the region, including in Japan, which had been booming with tourists from abroad ahead of the pandemic.

“The quiet economic calendar yesterday brings sentiments to focus on the single relief headline of a potential US tariff-easing decision, which could run the risks of a sharp paring back in speculative bullish bets in the event of any inaction,” Yeap Jun Rong, a market strategist at IG in Singapore, said in a commentary.

But risks remain because of inflation and slowing economic activity in some countries. A resurgence in Covid-19 infections in Europe, the US and parts of Asia is also looming, bringing the threat of a reversion to pandemic precautions.

Japan’s benchmark Nikkei 225 added 0.9 per cent in afternoon trading to 26,382.38. South Korea’s Kospi jumped 1.4 per cent to 2,332.32. Hong Kong’s Hang Seng gained 0.4 per cent to 21,915.99, although the Shanghai Composite reversed course, falling 0.3 per cent to 3,395.72.

Australia’s S&P/ASX 200 rose 0.7 per cent to 6,655.40 after the central bank lifted its benchmark interest rate for a third time in three straight months, changing the cash rate to 1.35 per cent from 0.85 per cent. The Reserve Bank of Australia’s half a percentage point rise on Tuesday was the same size as its June increase.

When the bank lifted the rate by a quarter percentage point at its monthly board meeting in May, it was the first rate hike in more than 11 years.

Global investors have been worried about surging inflation and the possibility that higher interest rates could bring on a recession in some economies. US trading was closed Monday for Independence Day.

Minutes of the latest policy meeting of the Federal Reserve are due out on Wednesday and could bring hints on future policy.

The futures for the Dow industrials and the S&P 500 were both up 0.4 per cent early Tuesday.

Shares ended last week with a rally, with the S&P 500 surging 1.1 per cent. The Dow gained 1 per cent and the Nasdaq rose 0.9 per cent. The Russell 2000 index of smaller companies gained 1.2 per cent.

In the first half of this year, the S&P 500 had its worst performance since the first six months in 1970. It’s now down 20.2 per cent from the peak it set at the beginning of this year.

The risk of a recession is simmering as the US Federal Reserve aggressively hikes interest rates. The Fed is raising rates to purposefully slow economic growth to help cool inflation, but could potentially go too far and bring on a recession.

In Germany, Chancellor Olaf Scholz gathered top employer and labour union representatives at his Berlin office Monday to seek ways of addressing the impact of rising prices while preventing a spiral of inflation in Europe’s biggest economy.

In energy trading, benchmark US crude surged $2.00 to $110.43 a barrel. It gained $2.67 on Friday to $108.43 a barrel. Trading was closed Monday. Brent crude, the international standard, rose 24 cents to $113.74 a barrel.

In currency trading, the US dollar edged up to 136.31 Japanese yen from 135.69 yen. The euro cost $1.0446, up from $1.0423.


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