Title: Asian stocks perk up as China hopes overshadow inflation fears

May 31, 2022 02:40AM ET

By: AnalysisWatch

Asian stocks extended earlier losses Tuesday as signs that China's economic pain from easing COVID-19 requirements may gradually ease overshadowed broader investor concerns about global inflation shocks.

Sentiment in the region was also supported by Beijing's new policy measures, including financial support for graduate employment and encouragement for the offshore listing of Internet companies.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7%, reversing earlier losses, led by gains in China and Hong Kong.

However, trading outside China was mixed as global inflation remained a concern. Japan's Nikkei index was unchanged. Futures on the FTSE index were unchanged, while futures on the Euro STOXX 50 index fell 0.2%.

Meanwhile, U.S. Treasuries fell after returning from the holiday in the U.S. on Monday, causing the 10-year yield to rise almost 10 basis points to 2.8404%.

Eurozone inflation data is due on Tuesday and carries upside risks, with jitters stoked by oil prices, which rose to a two-month high after Europe pledged to cut imports of Russian crude.

Asian Fed funds futures fell sharply as investors braced for a relentless rate hike that would raise the benchmark rate to 3% by mid-2023.

The dollar strengthened, last trading 0.3% higher at $1.0751/euro, while 123.93 yen was bought, also 0.3% higher.

The trade-sensitive New Zealand dollar fell from a three-week high, while the Australian dollar found support, stabilizing at $0.7195 after positive domestic data and relief that the Chinese slowdown appears to be easing.

China's Shanghai Composite Index rose 1%, and Hong Kong's benchmark index rose 0.6%. The Chinese yuan held steady at $6.6640, while the dollar gained elsewhere.

Brent crude futures hit a two-month high of $123.58 per barrel after the European Union pledged to reduce Russian oil imports by the end of the year.

A stronger dollar pushed gold prices down slightly to $1,853 an ounce.