TOKYO (Reuters) – Asian stocks returned from a three-month low on Friday due to a late-day rally on Wall Street as optimism about the global economic recovery was overshadowed by rising tensions between the West and China.
The former MSCI Asia Asia Index rose 0.37% after hitting a three-month low on Thursday, while the Shanghai Composite Index gained 0.78%, recording a three-day loss.
“Recent declines in Chinese equities have been worrying, but there is no change in the recovery of the Chinese economy,” said Yasutada Suzuki, head of emerging market investments at Sumitomo Mitsui Bank.
On Thursday, Chinese stocks fell almost to a three-month low at the beginning of the month. The European Union joined Washington’s allies last week in imposing sanctions on officials in China’s Xinjiang region on charges of human rights abuses, leading to sanctions in retaliation in Beijing.
“All the sanctions so far have been largely symbolic and should have little economic impact. But the Sino-US confrontation affects market sentiment. It could take some time for them to reach any compromise, “Suzuki added.
The Japanese Nikkei rose 0.89% after Wall Street staged a rally, driven by cheap, cyclical stocks that were hit by the pandemic.
The Dow Jones industrial average rose 0.62% and the S&P 500 gained 0.52%, while the Nasdaq Composite added just 0.12%.
Analysts said trading was driven by a rebalancing of investment portfolios at the end of the quarter by institutional investors rather than the flow of news, although they noted that overnight headlines largely support equities.
Data from the US Department of Labor showed that claims for unemployment benefits fell to a one-year low last week, a sign that the US economy is on the verge of growing stronger as the public health situation improves.
In his first official press conference, US President Joe Biden said he would double his administration’s vaccination launch plan after reaching the previous target of 100 million photos 42 days ahead of schedule.
But while improving the US health crisis has sustained global risk appetite, investors are increasingly alarmed by a divergence in health conditions.
“Vaccination in continental Europe is falling behind. In relation to the USA, the economic reopening will probably be delayed, because some countries are forced to impose blockades “, said Soichiro Matsumoto, investment director, Japan, at the private banking unit of Credit Suisse in Tokyo.
This put pressure on the euro, which licked its wounds at $ 1.1780 after falling above $ 1.1762 overnight, its lowest levels since November.
The dollar also rose to 109.17 yen, a striking distance from last week’s nine-month high of 109,365 yen.
The US index was near its highest level since mid-November, after gaining 2.0% so far this month.
“The dollar is absolutely critical,” said James Athey, chief investment officer at Aberdeen Standard Investments in London.
“If the dollar starts to rise, that becomes a problem. It means weakness of goods and weakness of the emerging market and begins to provide a compensatory disinflationary narrative. ”
Oil prices recovered slightly from a 4% drop on Thursday, although they are on track for the third consecutive week of losses due to concerns about a further reduction in demand. [O/R]
In addition to Europe, major developing economies, such as Brazil and India, are also struggling with a resurgence of COVID-19 cases.
The market has attracted some more support due to supply disruptions, as a container ship stranded in the Suez Canal could block the vital shipping lane for weeks.
American crude oil rose 0.99% last year to $ 59.14 a barrel, and Brent to $ 62.44, up 0.79%.
Additional reporting by Katanga Johnson in Washington; edited by Richard Pullin and Ana Nicolaci da Costa