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Asia stocks try to bounce, China data a risk -Breaking

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© Reuters. FILEPHOTO: An overpass is constructed with an electronic screen showing Shanghai stock indexes. It can be seen at Lujiazui Financial District in Shanghai. REUTERS/Aly Song

Wayne Cole

SYDNEY, (Reuters) – Asian shares markets attempted a rare rally Monday following Wall Street’s rebound from its deep lows. However investors are also prepared for negative news about Chinese economic data later in the session.

China’s annual retail sales will fall 6.1% according to the forecasts, with industrial production expected to rise just 0.4%. There are risks to consider as China’s new banks have stopped lending for nearly four-and-half years.

Bruce Kasman (NYSE: ), head of economic research for JPMorgan, stated that the reports must highlight the economic damages caused by the country’s zero COVID policy. He expects contractions in demand and production indicators.

He said, “Having reduced our full-year GDP projection to 4.3%,” adding that the policy response to weaknesses remains surprising tame. The CNY is the place to be, and the PBOC is silent despite recent sharp declines.

Beijing did permit a further reduction in the mortgage interest rate for some home buyers on Sunday. Also, there were rumors that the central banking might reduce its medium term lending rates by 10 basis point on Monday.

After losing 2.7% last week, MSCI’s largest index of Asia-Pacific shares in Asia-Pacific stocks outside Japan slipped 0.3% to reach a new two-year low.

The export market rose 1.2% last week, despite a 2.1% drop in the yen.

In early trade, stock futures climbed 0.3% while Nasdaq’s futures jumped 0.6%. Both remain far from last year’s highs, with the S&P having fallen for six straight weeks. [.N]

Inflation at an all-time high and higher interest rates caused consumer confidence to plummet to an 11-year low early May. It also raised expectations for April retail sales, which are due Tuesday.

SLOW DOWNGRADING GREEN

An overly hawkish Federal Reserve led to a severe tightening financial environment, leading Goldman Sachs to lower its 2022 GDP forecast from 2.6% to 2.4%. The growth rate for 2023 has been reduced from 2.2% to 1.6% annually.

Jan Hatzius from Goldman Sachs said, “Our financial condition index has tightened more than 100 basis points. This should cause a drag on GDP Growth of around 1pp.”

We expect the tightening of financial conditions to continue, partly because the Fed is expected to deliver what it has priced.

Futures suggest 50 basis points increases in July and June, as well rates between 2.5-3.0% per year. Rates will be a bit higher than the 0.75-1.0% currently.

The fear that this tightening would lead to recession prompted a bond rally last week. Ten-year yields fell 21 basis points after peaking at 3.20%. On Monday, yields had risen a bit to 2.94%.

The dollar fell from its 2-decade-high, but not significantly. Last at 104.550 and just a few steps from the 105.010 peak.

After falling as low as $1.0348 last Wednesday, the euro was at $1.0397 this week. The dollar climbed to 129.44 after dropping as far as 127.54.

Last week, cryptocurrency prices were up 5.1% to $31,277. This was after it touched its lowest level since December 2020 following the crash of TerraUSD, which is a “stablecoin”.

The commodity markets saw gold under pressure due to high yields, strong dollars, and last week, it was up 1.1% at $1810 an ounce after losing 3.8%. [GOL/]

The rise in oil prices was due to record-breaking U.S. gasoline price levels. China appeared ready for pandemic relief and investors were concerned that Russian oil could cause a tightening of supplies. [O/R]

The price was quoted at $112.28 for 73 cents more, but rose by 79 cents ($111.128). [O/R]

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