Asian stocks were mostly higher on Friday after a broad rally on Wall Street, but Hong Kong’s benchmark fell more than 2%.
Investors appear to have grown more confident that the Federal Reserve could temper its aggressive interest rate hikes aimed at controlling inflation after the Commerce Department announced that the US economy had contracted at an annual rate of 0. .9% in the last quarter. This follows a 1.6% year-on-year decline in the first quarter.
Investors were cautiously monitoring regional tensions over China’s stance on Taiwan after President Joe Biden and China’s Xi Jinping spoke for more than two hours on Thursday. China has left no doubt that it blames the United States for deteriorating relations, but the White House said the purpose of the call was to “responsibly manage our differences and working together where our interests align”.
Hong Kong’s Hang Seng Index fell 2.3% to 20,148.90 and the Shanghai Composite Index fell 0.7% to 3,258.86 after Chinese leaders acknowledged that the economy struggling would miss its official growth target of 5.5% this year.
The announcement after a ruling Communist Party planning meeting on Thursday said Beijing will try to support lower consumer demand but stick to tough anti-COVID-19 tactics that have disrupted manufacturing and trade. This underscores the high cost Xi’s government is willing to incur to stop the virus in a politically sensitive year when he is widely expected to attempt to extend his term in power.
Japan’s benchmark Nikkei 225 lost 0.3% to 27,750.17, while Australia’s S&P/ASX 200 gained 0.8% to 6,947.30. South Korea’s Kospi added 0.4% to 2,446.22.
Japanese government data showed factory output in June jumped 8.9% from the previous month, marking the first rise in three months. The recent easing of pandemic lockdowns in China has helped boost Japanese production.
“On the economic data front, China’s easing of restrictions also led to stronger-than-expected June production for Japan, with China’s reopening potentially having a positive impact across the region as well as in the second half of the year,” Yeap said. Jun Rong, market strategist at IG in Singapore.
A rise in COVID-19 infections to record levels in many parts of Japan has raised concerns. But Robert Carnell, regional head of Asia-Pacific research at ING, believes Japan’s second-quarter GDP, or gross domestic product, will rebound slightly from the first-quarter contraction.
On Thursday, the S&P 500 rose 1.2% to 4,072.43, while the Dow gained 1% to close at 32,529.63. The Nasdaq gained 1.1% to 12,162.59. The Russell 2000 rose 1.3% to 1,873.03.
Consecutive quarters of falling GDP are an informal, but not definitive, indicator of what economists call a technical recession.
The GDP report pointed to weakness across the economy. Consumer spending slowed as Americans purchased fewer goods. Business investment fell. Inventories fell as businesses slowed their restocking of shelves, losing 2 percentage points of GDP.
The Federal Reserve has made slowing the U.S. economy to tame the highest inflation in 40 years its goal by raising interest rates, most recently on Wednesday. The latest GDP report, along with other recent weak economic data, may give some investors reassurance that the central bank will be able to mitigate the magnitude of any further rate hikes.
In a research note on Thursday, Jonathan Golub, chief US equity strategist at Credit Suisse Securities, said: “Whether or not we are in a recession will be debated by academics in the months ahead. However, today’s report unequivocally reflects a substantial weakening in economic activity and increases the likelihood of a dovish turn from the Fed.
The central bank on Wednesday raised its main short-term interest rate by 0.75 percentage points, taking it to its highest level since 2018. The move sparked a broad market rally led by tech stocks that helped to give the Nasdaq its biggest gain in more than two years. . The major indexes are now all on pace for a weekly gain, extending Wall Street’s strong rally in July.
In a busy week of corporate earnings reports, investors focused on what companies are saying about inflation and the impact of rising interest rates on their businesses and earnings. clients.
Tech stocks and retailers, restaurant chains and other businesses that depend on direct consumer spending helped lift the S&P 500 on Thursday. Microsoft rose 2.9%, Target gained 3.1% and McDonald’s rose 1.8%.
Communications services stocks were the only laggards. Meta platforms fell 5.2% after the social media giant said its revenue fell for the first time last quarter, led by lower ad spend.
Shares of Spirit Airlines rose 5.6% after JetBlue announced it had agreed to buy the low-cost airline for $3.8 billion to create the nation’s fifth-largest airline. A day earlier, Spirit’s attempted merger with Frontier Airlines had failed. Frontier Airlines jumped 20.5%.
In energy trading, benchmark U.S. crude gained 25 cents to $97.28 a barrel in electronic trading on the New York Mercantile Exchange. It lost 84 cents to $96.42 on Thursday.
Brent crude, the international price standard, added 3 cents to $101.86 a barrel.
In currency trading, the US dollar fell to 133.24 Japanese yen from 134.27 yen on Thursday evening. The euro traded at $1.0220, falling from $1.0199.
AP Business Writer Alex Veiga contributed.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama