Global stock markets rose Friday after Wall Street fell closer to bear territory, China cut a key interest rate and Japanese inflation edged higher. London opened higher while Frankfurt retreated. Shanghai, Tokyo, Hong Kong and Sydney gained. Oil prices declined.
Wall Street futures were higher after the benchmark S&P 500 index lost 0.6 per cent on Thursday as rising interest rates, Russia's war on Ukraine and a Chinese economic slowdown added to investor unease. The benchmark is down 18.7 per cent from its January high and close to the 20 per cent decline that defines a bear market.
“This is unlikely to be rock bottom, given the tightening of financial conditions ahead,” said Tan Boon Heng of Mizuho Bank in a report. “Reality may again be harsher than expectations.” In early trading, the FTSE in London rose 1.5 per cent to 7,409.16 while Frankfurt's DAX shed 0.9 per cent to 13,882.30. The CAC 40 in Paris sank 1.3 per cent to 6,272.71.
On Wall Street, the S&P 500 future was up 0.8 per cent. On Thursday, the Dow Jones Industrial Average also fell 0.8 per cent and the Nasdaq slipped 0.3 per cent. In Asia, the Shanghai Composite Index rose 1.2 per cent to 3,134.21 after the Chinese central bank reduced its rate on a five-year loan, which would shore up weak housing sales by cutting mortgage costs.
The one-year loan rate that affects commercial borrowers was left unchanged. That suggests Beijing is “trying to keep easing targeted and that we shouldn't expect large-scale stimulus,” said Julian Evans-Pritchard of Capital Economics in a report.
The Nikkei 225 in Tokyo jumped 1.3 per cent to 26,746.24 after Japanese consumer inflation rose to 2.5 per cent in April from the previous month's 1.3 per cent. It was the first time since 2008 that inflation was above the central bank's 2 per cent target. Core inflation, which excludes fresh food and energy, rose to a seven-year high of 2.1 per cent from March's 0.8 per cent.
Unlikely to change interest
Despite that, economists say the central bank is unlikely to change interest rates due to the weakness of the economy, which contracted in the last quarter. The Hang Seng in Hong Kong gained 2 per cent to 20,533.33 and the Kospi in Seoul advanced 1.7 per cent to 2,636.83. Sydney's S&P-ASX 200 added 1 per cent to 7,139.00.
India's Sensex rose 2.2 per cent to 53,950.87. New Zealand and Southeast Asian markets also rose. Investors are watching the Federal Reserve for hints of more interest rate hikes to cool inflation that is running at a four-decade high.
Fed Chair Jerome Powell said this week the US central bank might take more aggressive action if price pressures fail to ease. Traders also are uneasy about China's economy following official data that showed factory and consumer activity in April were weaker than forecast after Shanghai and other industrial centres shut down to fight coronavirus outbreaks.
US tech stocks fell Thursday, accounting for a big share of the S&P 500's drop. Cisco Systems slumped 13.7 per cent after the seller of routers and switches cut its profit forecast amid supply chain constraints. Synopsis jumped 10.3 per cent after the software company raised its financial forecasts for the year. Retailers and other companies that rely on direct consumer spending mostly rose. Amazon added 0.2 per cent and Expedia climbed 5.3 per cent.
In energy markets, benchmark US crude lost 70 cents to $109.19 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.62 on Thursday to $112.21. Brent crude, the price basis for international oil trading, shed 45 cents to $111.59 per barrel in London. It gained $2.93 the previous session to $112.04. The dollar edged up to 127.78 yen from Thursday's 127.74 yen. The euro declined to $1.0574 from $1.0598.