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Asian stocks steady after China agrees to support Covid-19 affected economy, oil falls below $100/bbl

An Asia-Pacific equity index eked out a gain amid calmer conditions on Chinese bourses compared with Monday’s plunge. Tech stocks in Hong Kong jumped. European futures added about 1% and US contracts were little changed.

S&P 500 futures were steady while Nasdaq 100 futures lost 0.1% on Tuesday in early Asian trade. (File: Reuters)

Asian stocks steadied Tuesday as China pledged to boost monetary-policy support for the nation’s Covid-afflicted economy, whose travails are darkening the outlook for the global recovery.

An Asia-Pacific equity index eked out a gain amid calmer conditions on Chinese bourses compared with Monday’s plunge. Tech stocks in Hong Kong jumped. European futures added about 1% and US contracts were little changed.

Most of Beijing is being tested for the virus, fanning fears of an unprecedented lockdown there. Aside from vowing more assistance, the People’s Bank of China also said it will promote healthy and stable development in financial markets.

Treasuries held a climb and sovereign notes in Australia and New Zealand advanced, while a gauge of the dollar dipped. Investors are calibrating the risk of an economic downturn due to China’s lockdowns as well as aggressive Federal Reserve policy tightening to quell inflation.

The PBOC Monday cut the amount of money banks must set aside in reserve for foreign-currency holdings, effectively boosting the domestic supply of dollars.

Oil held a retreat below $100 a barrel, weighed down by the threat to demand from China. The virus outbreak in the world’s biggest crude importer is another source of commodity-market volatility alongside Russia’s invasion of Ukraine.

The prospect of slower economic expansion alongside persistent inflation is leading to a febrile mood in markets. The panoply of risks spans the pandemic, supply-chain disruptions, Fed tightening and the grinding war.

“It’s a question of what’s monetary policy going to look like and it’s super unknown,” Nancy Davis, chief investment officer at Quadratic Capital Management LLC, said on Bloomberg Television.

In China, pressure is mounting on its leaders to bolster the outlook.

“For the time being, the specter of more severe restrictions in China is not being traded from the inflationary side, but rather as a detriment to the global recovery and as a demand-negative shock,” Benjamin Jeffery and Ian Lyngen, strategists at BMO Capital Markets, wrote in a note.

They added they are “less convinced that the situation will be enough to materially shift the FOMC’s aggressiveness.”

Wall Street shares closed a choppy session higher Monday after Elon Musk agreed to buy Twitter Inc. and as dip buyers emerged ahead of big-tech earnings reports.

Events to watch this week:

  • Tech earnings include Alphabet, Meta Platforms, Amazon, Apple
  • EIA oil inventory report, Wednesday
  • Australia CPI, Wednesday
  • Bank of Japan monetary policy decision, Thursday
  • U.S. 1Q GDP, weekly jobless claims, Thursday
  • ECB publishes its economic bulletin, Thursday

Some of the main moves in markets:

Stocks

  • S&P 500 futures were steady as of 10:58 a.m. in Tokyo. The S&P 500 rose 0.6%
  • Nasdaq 100 futures lost 0.1%. The Nasdaq 100 rose 1.3%
  • Japan’s Topix index rose 0.1%
  • Australia’s S&P/ASX 200 index shed 1.9%
  • South Korea’s Kospi index added 0.4%
  • China’s Shanghai Composite index fell 0.9%
  • Hong Kong’s Hang Seng index increased 0.4%
  • Euro Stoxx 50 futures rose 1.2%

Currencies

  • The Bloomberg Dollar Spot Index edged down 0.1%
  • The euro was at $1.0725
  • The Japanese yen was at 127.55 per dollar, up 0.5%
  • The offshore yuan was at 6.5873 per dollar, down 0.2%

Bonds

  • The yield on 10-year Treasuries was at 2.81%
  • Australia’s 10-year bond yield dropped eight basis points to 3.05%

Commodities

  • West Texas Intermediate crude was at $98.94 a barrel, up 0.4%
  • Gold was at $1,900.47 an ounce, up 0.1%

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