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  • Writer's pictureanalysiswatch

Title: Asian shares stumble on growth worries as central banks tighten

May 26, 2022 04:36AM ET

By: AnalysisWatch

Asian equity markets fell on Thursday on lingering concerns over China's economic growth and concerns over the US Federal Reserve's intention to tighten monetary policy sooner rather than later, as confirmed in the minutes of its interest rate-setting meeting released overnight.

The MSCI, the broadest index of Asia-Pacific equities outside Japan, fell 0.6%, bringing its monthly loss to 5%.

Australian equities fell 0.47%, while Japan's Nikkei 225 Index lost 0.17%. The Euro Stoxx 50 fell 0.14% and German DAX futures also fell.

The Asian drop contrasted with Wall Street's upbeat mood, with the Dow Jones Industrial Average up 0.6%, the S&P 500 up 0.95%, and the Nasdaq Composite up 1.51%.

While some investors are concerned that the Fed's overly aggressive rate hikes could set the economy back, the minutes released on Wednesday seem to suggest that the tightening process will be paused to assess the impact on economic growth.

Analysts expect the annualised GDP to show a weaker decline than the first quarterly GDP decline of 1.4 per cent.

In Asia, South Korea's central bank raised interest rates for the second consecutive time as the country struggled with consumer inflation, which reached a 13-year high.

Chinese stocks initially fell but recovered during the day as the number of COVID-19 cases fell, with measures to curb the spread of the virus in COVID-19 threatening to undermine recent economic support measures.

Mainland Chinese markets also appeared to find solace in Premier Li Keqiang's statement that the economy will achieve reasonable growth in the second quarter and halt the rise in unemployment.

The dollar, which rose on Wednesday following the release of the Fed minutes, was little changed in Asian trading. It was little changed against the yen, trading at USD 127.30 and USD 1.0675 against the euro.

Crude oil was steady after a week of cautious gains. Brent crude remained unchanged at USD 114.03 per barrel, while US crude increased 0.13% to USD 110.47.

Spot gold fell 0.2% to $1849.19 an ounce.

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