Asian traders take breather, Hong Kong slips after huge surge

Asian equities were mixed Friday as investors took a breather from a strong rally, with Hong Kong giving up some of the colossal gains fuelled by China's support pledge, while unease over the Ukraine war helped oil extend a recovery.

After a painful start to the week, global stocks have enjoyed a massive bounce in the past few days thanks to optimism over peace talks between Moscow and Kyiv and after Beijing's signal that it was ready to shore up markets and ease off its tech crackdown.

And while the Federal Reserve announced the first of what many think will be seven interest rate hikes this year, traders have largely accounted for a period of tighter monetary policy.

Focus remains on Russia's invasion of Ukraine and its impact on the global economy as surging commodity prices ramp up expectations for ever-higher inflation, which was already at a 40-year high in the United States.

Talks between Joe Biden and his Chinese counterpart Xi Jinping will be closely followed, with the White House looking to get Beijing onside in trying to bring an end to the conflict.

That comes as Russia appeared to play down reports of progress in talks with Ukraine on a ceasefire, while the Pentagon warned that Vladimir Putin could threaten to use nuclear weapons if the conflict continues to drag on.

On equity markets, Asia was unable to build on the previous two day's surge.

Hong Kong dropped more than one percent, having clocked up a mammoth 16 percent on Wednesday and Thursday after China's top economic official vowed measures to support beaten-down markets and indicated a regulatory drive against the tech sector was nearing its end.

A gauge of tech firms in Hong Kong also fell after seeing breakneck gains.

There were also losses in Seoul, Singapore, Taipei, Manila and Jakarta, though Tokyo, Shanghai, Sydney and Wellington were in positive territory.

But while the extreme volatility that has characterised markets since Russia's invasion three weeks ago has died down for now, commentators remain cautious.

"I don't necessarily expect the rest of the year to be that easy," Lori Calvasina, of RBC Capital Markets LLC, told Bloomberg Television.

"Volatility is likely to stay elevated for quite some time" even as sentiment gauges "have been a screaming buy in some respects for quite some time".

The uncertainty over Ukraine, and reports that some lockdown measures in Chinese tech hub Shenzhen -- which helped fuel a markets selloff earlier this week -- were being eased early, has helped push oil prices back up above $100.

And Stephen Innes of SPI Asset Management said the commodity would probably remain elevated.

"Market internals suggest that oil's downside remains sticky even when Ukraine and Russia are inching towards peace," he said in a note. "So there is a genuine belief that even if the war does end, sanctions on Russia will likely persist, making oil supplies tougher to source for longer.

Markets rally again as Hong Kong extends surge
Hong Kong (AFP) March 17, 2022 - Asian and European markets rallied further Thursday with another blistering surge in tech firms helping Hong Kong extend its recovery from the recent rout, while traders also cheered soothing comments on the US economy by the Federal Reserve after it lifted interest rates.

Regional sentiment remains buoyant after China's top economic official vowed measures to support beaten-down markets and indicated that a debilitating crackdown on the technology sector was nearing its end.

The news lit a fire under Asia on Wednesday -- sending Hong Kong's Hang Seng Index rocketing more than nine percent and the city's tech gauge flying by a record 22 percent.

That provided a platform for traders in Europe and New York, where an index of US-listed Chinese firms ended up 33 percent.

And the buying continued in early business on Thursday, with the HSI piling on seven percent with market heavyweight tech titans including Alibaba, Tencent and JD.com building on their eye-watering rallies.

Companies in other sectors that have been in Beijing's cross hairs over the past year, such as casinos and developers, also extended a rally.

"The statement addressed so many issues on various fronts, which is really rare," Ding Shuang at Standard Chartered said.

"Selloffs tended to be self-fulfilling partly because of the lack of response from the government," but part of the government's aim is likely to break that inertia and stabilise expectations, he added.

Adding to the broadly positive mood on trading floors were hopes that Ukraine and Russia were edging towards a ceasefire in a war that has sent markets spiralling and fears over inflation soaring with commodity prices.

Traders have grown increasingly worried that the spike in inflation and war in Europe will knock off-course an already fragile pandemic recovery, providing a headache for central bankers who are trying to rein in ultra-loose monetary policies.

And the Fed appeared to soothe some of those worries Wednesday when it lifted interest rates -- by a quarter of a point -- for the first time since 2018 but gave an upbeat review of the world's number-one economy.

Governor Jerome Powell said there was little chance of a recession in the next year and noted that it was "very strong and well positioned to handle tighter monetary policy".

He told reporters after the rate hike: "We're not going to let high inflation become entrenched. The costs of that would be too high."

The Fed was committed to using its "powerful tools" to prevent that, he added, while a gauge of future hikes suggested another six could be on the cards before the end of the year.

"The (policy board) was interpreted as hawkish, but expectations ran high for that scenario," said Stephen Innes of SPI Asset Management.

"Perhaps getting the event out of the way without a significant shock was enough to keep risk supported and, potentially, the dollar on the back foot.

"Risk assets could be interpreting this arguably 'too aggressive'. I think it's too early to panic on that front, 25 basis points is not a dramatic initial tightening and... the Fed maintains its flexibility.

"The last thing the Fed wanted to do was to err on the side of caution, which would have crushed their credibility.

"I think the Fed's hawkish tone is pushing away worries of the Fed behind the curve and inflation out of control. And stock markets like that."

After the healthy gains on Wall Street, Asia picked up the baton happily.

Tokyo charged more than three percent higher, while Shanghai, Sydney, Seoul, Mumbai and Manila were all up more than one percent. Taipei put on three percent with gains also seen in Singapore, Bangkok and Wellington.

London rose at the open ahead of a Bank of England rate decision later in the day. Paris and Frankfurt also advanced.

"The overall message you got from the Federal Reserve today was very clear," Deutsche Bank's Alan Ruskin told Bloomberg Television.

"They want financial conditions to tighten. The issue there is, can you soft-land this thing? Historically, when the Fed tightens, you do get some hard landing somewhere."

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Stocks fall as Hong Kong hammered again, oil retreats
Hong Kong (AFP) March 15, 2022
Equity markets fell Tuesday, with Hong Kong tech firms leading another collapse in the city's Hang Seng Index following the Covid-19 shutdown of tech hub Shenzhen and worries over Russia's military outreach to China. Concerns about China's economic outlook saw oil prices suffer fresh selling pressure, with WTI falling back below $100 a week after it hit a 14-year high on the back of Vladimir Putin's invasion of Ukraine. Hopes for progress in talks to bring an end to the war in eastern Europe wer ... read more