By Alun John

HONG KONG, (Reuters) – Fears of a severe economic slowdown and rising oil prices weighed heavily on Asian stocks. However, a drop in U.S. treasury yields provided some relief to markets more concerned about the possibility of rate increases.

Chinese shares and Hong Kong’s fell by months, while the yuan dropped to its lowest point in six years. Shanghai officials said that strict COVID-19 restrictions will remain in effect.

The Chinese blue chip market lost 1.8% and Hong Kong stock markets fell 2.2%. They both dropped to their lowest point since mid March. Spot yuan reached 6.4478 USD, the lowest level since October.

MSCI’s Asia-Pacific share index outside Japan fell 0.66% despite gains in Australia (where the local benchmark rose 0.4%) and Korea (where it was at a near-record high).

The increase was 1.22%

Nomura analysts stated that they had reduced their Q2 China GDP forecast from 3.4% to 1.8% due to “faster worsening high frequency activity data in April”, the increasing number of cities under partial and full lockdowns, serious logistics disruptions and signs Beijing may not end its zero-Covid strategy very soon.”

Kristalina Georgieva, IMF’s Managing Director, stated that a prolonged slowdown of China could have significant global spillovers. However, she added that Beijing still has the ability to change its policy in order to support it.

U.S. stock futures and European stock futures indicated higher openings elsewhere. EUROSTOXX50 futures saw 0.4% growth and futures increased 0.3%. Nasdaq futures, however, jumped 0.8% while futures rose 0.5%.

Analysts believe that part of the reason behind the market’s gains was the overnight drop in U.S. benchmark 10-year yields, even though it might be short-lived.

Last Wednesday, it stood at 2.8766%. This was slightly more in Asia-trade, although still a bruised stock after falling as low as 2.981% earlier on Wednesday.

Rob Carnell of ING Asia Pacific, Head of Research, said, “I believe we’re still headed towards 3% for ten year treasuries. I think it was a little profit taking.”

The dollar fell overnight due to lower yields, especially against sterling and the euro which were both beaten down. Sterling managed to recover some ground. ()

Asia Hours saw a muteder movement. There was very little change at 100.36, compared to 101.03.

However, the dollar rose 0.2% to 128.16, but the recovery of the yen on Wednesday – the first time in almost two weeks that it has seen gains against the dollar – was short-lived.

Due to the Bank of Japan holding yields low and rates rising in the United States, the yen fell quickly to its 20-year lowest. It is expected to continue falling, according to most investors. Most bettors believe that even an intervention by the government won’t stop this trend.

In choppy trading, oil prices rose as worries about the supply of Russian oil increased due to concerns about its possible ban by the European Union. Russian forces increased their aggression in eastern Ukraine Thursday.

Futures rose 1.54% at $108.44/barrel, while futures rose by 1.44% at $103.7.

It fell to $1.954.7 per ounce, or 0.255%.