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ASIA MARKETS: Shares, US Equity Futures Recover; Yuan Extends Decline

Friday,   13-May-2022   09:52 AM (IST)

Asian shares were trading higher, tracking a recovery in U.S. equity futures, while the Chinese yuan fell to new year-to-date lows amid bleak economic outlook. Futures on the S&P 500 Index were up 0.7% after the gauge slid to a more-than-one-year low yesterday. Shares climbed 2.4% in Japan, advanced 1.6% in South Korea and Hong Kong, and rose 1.4% in Australia. Chinese equities were a tad higher while the FTSE Bursa Malaysia Index, led by plantation companies, was up 0.5% at 1,546.66. The onshore Chinese yuan declined below 6.80 to the dollar for the first time since September 2020. The cut in China GDP projections amid lockdowns alongside contrasting policy outlooks for the U.S. Federal Reserve and the People’s Bank of China have prompted a near 7% decline on the yuan since the beginning of April. The dollar index, helped by the Fed interest rate outlook and the mounting uncertainty on growth, climbed 1% yesterday to reach a fresh 20-year high. The Malaysian ringgit dropped to 4.3950 and the Indonesian rupiah lost 0.2%. Investors are assessing the deteriorating outlook for growth amid indications that price pressures were likely to sustain. The U.S. and China inflation prints both topped expectations and data released yesterday showed that consumer prices in India rose at the fastest pace in 18 months. India’s central bank, which earlier this month raised rates at a non-scheduled meeting, is tipped to raise borrowing costs again next month. Meanwhile, the Fed is expected to raise rates by 50 basis points at least in the next two meetings. Fed Chair Jerome Powell yesterday affirmed the U.S. central bank’s determination to bring down inflation, but once again repeated that policymakers were not actively considering 75-basis-points rate hikes. Longer maturity Treasury yields dropped. Powell’s comments that the Fed was not considering bigger rate increases will provide a semblance of relief for investors. Equities have suffered major losses on concerns over inflation and the impact the pace of rate hikes is likely to have on growth. The S&P 500 Index yesterday came within striking distance of a bear market.