By Ankur Banerjee
SINGAPORE (Reuters) – Asian equities surged on Friday and were set for their first weekly gain in a month, as renewed hopes that China will relax its strict COVID measures spurred a rally in riskier assets.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 2.07% higher on the day, with China’s stock market up 2% and Hong Kong’s Hang Seng Index surging nearly 6%.
The Hong Kong index was set for its biggest weekly gain in over a decade.
European stock futures indicated stocks were set to gain, with the Eurostoxx 50 futures up 0.67%, German DAX futures up 0.45% and FTSE futures up 0.63%.
The market was mainly driven by growing hopes that China will relax its zero-COVID policy and the need for a technical rebound, said Kenny Ng, securities strategist at China Everbright Securities in Hong Kong, adding that the rebound is more likely a short-term one as fundamentals have not changed.
Also lifting sentiment was a report from Bloomberg that said initial U.S. inspections of audit papers at U.S.-listed Chinese companies were finished ahead of time, raising hopes that the U.S. officials were satisfied. The auditing issue has been among a host of developments that have strained Sino-U.S. financial ties.
Hong Kong and China stocks have moved sharply through the week. Rumours based on an unverified note circulated on social media on Tuesday that China was planning a reopening from strict COVID curbs in March. A Chinese foreign ministry spokesman said at the time he was unaware of the situation.
Anti-virus curbs have weighed heavily on the Chinese economy, exacerbating a global slowdown. Despite growing speculation, most analysts see no significant easing in COVID containment measures through at least the winter, or longer.
Global stocks have been rattled since comments from Fed Chair Jerome Powell on Wednesday that it was “very premature” to be thinking about pausing its rate hikes, putting a lid on any lingering investor hopes of a near term pivot.
“Chair Powell removes the punchbowl yet again, in response to a tiny bit of partying,” Citi analysts said, referring to the past few days rise in equities over hopes of a change in tone from the central bank.
“The sensitivity of the Fed to improving financial conditions is seemingly quite high and we think is likely to remain so while inflation is too high for its liking,” Citi added, noting that it was not a good set up for risky assets.
Investors will be keeping an eye on Friday’s U.S. payrolls report where any upside surprise will likely reinforce the Fed’s hawkish outlook. Economists polled by Reuters expect nonfarm payrolls to have increased by 200,000 jobs in October.
In the currency market, sterling was up 0.38% at $1.1207, after sliding 2% overnight when the Bank of England raised interest rates by the most since 1989, but warned a long recession looms.
The U.S. dollar index, which measures the greenback against a basket of currencies, fell 0.292%, after surging 0.8% overnight and touching a roughly two-week high of 113.15.
In commodities, oil prices recouped early losses. [O/R]
U.S. crude recently rose 2.28% to $90.18 per barrel and Brent was at $96.62, up 2.06% on the day.
Gold prices regained some ground on Friday as a slight pullback in the dollar helped alleviate some pressure. Spot gold added 1.1% to $1,646.89 an ounce.
(Additional reporting by Summer Zhen in Hong Kong; Editing by Kim Coghill)