TOKYO (Reuters) – Asian stocks rebounded to a three-month low on Friday thanks to a Wall Street rally as optimism about the global economic recovery was overshadowed by rising tensions between the West and China.
MSCI’s former Asian Japan index rose 0.37% after hitting a nearly three-month low on Thursday, while the Shanghai Composite Index gained 0.78%, hitting a streak of defeats of three days.
“The recent falls in Chinese stocks have been worrisome, but there is no change in the fact that the Chinese economy is recovering,” said Yasutada Suzuki, head of emerging markets investment at Sumitomo Mitsui Bank.
On Thursday, Chinese stocks fell near a three-month low earlier this month. The European Union joined Washington’s allies this week in imposing sanctions on officials in the Chinese region of Xinjiang for allegations of human rights abuses, prompting retaliatory sanctions from 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 to reach any compromise, ”added Suzuki.
The Japanese Nikkei rose 0.89% after Wall Street shares staged a rally, driven by cyclical and cheap stocks that have been 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 more by a rebalancing of end-of-quarter investment portfolios by institutional investors than by a flow of news, although they noted that holders of a day by day they supported the actions.
Data from the U.S. Department of Labor showed that claims for unemployment benefits fell to a one-year low last week, a sign that the U.S. economy is on the verge of stronger growth in as the public health situation improves.
At his first formal press conference, U.S. President Joe Biden said he would double his administration’s vaccine deployment plan after reaching the previous target of 100 million shots 42 days earlier than expected.
But while the improvement in the U.S. health care crisis has sustained global risk appetite, investors are increasingly alarmed by a divergence in health conditions.
“Vaccination in continental Europe is lagging behind. In relation to the United States, economic reopenings are likely to be delayed, as some countries are forced to impose closures, “Soichiro Matsumoto, Japan’s director of investments, told Credit Suisse’s private banking unit in Tokyo.
This put pressure on the euro, which licked its wounds at $ 1.1780 after falling to $ 1.1762 overnight, the lowest levels since November.
The dollar also rose to 109.17 yen, a surprising distance from last week’s nine-month high of 109,365 yen.
The US currency index stood 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 of Aberdeen Standard Investments in London.
“If the dollar starts to rise, it becomes a problem. It means commodity weakness and emerging market weakness and is beginning to provide a disinflationary compensatory narrative. “
Oil prices rebounded slightly after falling 4% on Thursday, although they are on track for their 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 to resurrect COVID-19 cases.
The market still gained some support over concerns over the supply disruption, as a container ship stranded in the Suez Canal could block the vital lane for weeks.
US crude rose 0.99% from behind, with $ 59.14 per barrel and Brent, by $ 62.44, up 0.79%.
Additional reports from Katanga Johnson in Washington; edition by Richard Pullin and Ana Nicolaci da Costa