Asian equites gained sharply on Friday as China pledged to shore up economy.
Shares in Mainland China and Hong Kong gained sharply by 2.44% and 4.01% respectively. While South Korea and Japan gained over 1%. However, Thailand dipped marginally.
Contracts on the S&P 500 dropped 0.9%, while Nasdaq futures retreated 1.2% . Treasuries declined, taking the 10-year U.S. yield to 2.87%. In foreign-exchange markets, the yen snapped a slide while staying near 20-year lows.
The focus is on risk from China’s surging COVID-19 cases and the impact from Federal Reserve’s rate hike in the following week. Markets continue to project a half-point hike by the Fed.
The latest U.S. data showed that the world’s largest economy unexpectedly shrank for the first time since 2020. That reflected an import surge tied to solid consumer demand, suggesting growth will return imminently.
“The Fed is caught in the crossfire between killing inflation with the risk of triggering a recession now, or buying more time for nominal growth to increase, with a potentially hefty price to be paid later on,” Pascal Blanque, chairman of the Amundi Institute, wrote in a note.
“It is likely, and human, that they will sway toward the latter.”
Crude oil gained with the WTI trading around $106 a barrel and the Brent trading around $109 a barrel.