Hong Kong stocks soar on hopes China’s COVID rules may ease

TOKYO (AP) — Shares soared more than 7% in Hong Kong on Friday after a Communist Party newspaper reported that local authorities were urged not to impose overly burdensome controls to curb coronavirus infections.

Shanghai’s composite index jumped 2.5% as sentiment was also supported by an article in the People’s Daily party newspaper by China’s former top trade representative, Liu He, who said the country would continue its market reforms. He appeared to be seeking to assuage concerns after Liu and other prominent reformers were ousted from the top ranks of leadership at a party convention last month.

The Hong Kong market has been swirling in recent days as investors speculated on signs that Beijing may ease strict “zero-COVID” policies that have led to entire cities being locked down for weeks. The policies also call for frequent mass testing and lengthy quarantines for travellers.

The Global Times newspaper said China’s National Health Commission on Wednesday advised officials to try to curb outbreaks using the “minimum affected scale, shortest time and lowest possible cost”.

He said it was “in an effort to correct errors in overly strict measurements that have caused damage to property and people’s lives”. However, he also said that China “strongly adheres to the dynamic zero-COVID strategy by preventing the importation of cases and internal rebounds.”

This week has sparked a flurry of speculation that Beijing may be changing course nearly three years into the pandemic. Investors are watching for signs of demand picking up in China, the world’s second-largest economy, and an end to the manufacturing and transportation disruptions that have plagued global supply chains.

There has been no official confirmation of general policy changes.

Hong Kong’s Hang Seng fell slightly in afternoon trading, gaining 6.8% to 16,379.26. The Shanghai Composite added 2.5% to 3,073.86.

Elsewhere in Asia, Japan’s benchmark Nikkei 225 fell 1.8% to 27,163.13, catching up after Japanese markets closed on Thursday for a holiday.

Australia’s S&P/ASX 200 gained 0.5% to 6,892.50, and South Korea’s Kospi gained 0.5% to 2,341.02.

Wall Street’s benchmark S&P 500 lost 1.1% on Thursday, closing at 3,719.89 and the tech-heavy Nasdaq composite index fell 1.7% to 10,342.94 a day after the Federal Reserve raised its benchmark rate. for the sixth time this year.

The Dow lost 0.5% to 32,001.25, and The Russell 2000 fell 0.5% to 1,779.73.

As the Fed has signaled it may need to keep rates rising for a while to successfully crush the highest inflation in decades, higher rate expectations pushed Treasury yields higher. This weighed on equities as rising rates not only slow the economy by discouraging borrowingbut also make equities less attractive relative to lower-risk assets like bonds.

The central bank’s latest three-quarters of a percentage point increase takes short-term interest rates to a range of 3.75% to 4%, its highest level in 15 years. Wall Street is also divided on whether the central bank will eventually raise rates to a range of 5% to 5.25% or 5.25% to 5.50% next year.

Stubbornly high inflation prompted central banks around the world to raise interest rates as well. On Thursday, the Bank of England announced its largest interest rate hike in three decades. The increase is the eighth in a row for the Bank of England and the largest since 1992.

Investors were hoping for economic data signaling that the Fed might avoid further rate hikes that could go too far in the slowing economy and trigger a recession. But the warmer-than-expected data from the jobs sector suggests the Fed will remain aggressive. On Friday, Wall Street will receive a broader update to the US government’s October jobs report.

So far, hiring and wage growth have not declined fast enough for the Fed to slow its inflation-fighting efforts.

Investors will also be watching for the latest consumer inflation data. This report, the Consumer Price Index, is due out next week.

“A busy week ahead for economic releases is expected, with the focus on US and Chinese inflation figures for October. China will also update October trade figures. Meanwhile, the UK releases third quarter GDP figures while industrial production data from Germany will also be due,” S&P Global Market Intelligence said in its report for the coming week.

Wall Street has also been watching the latest corporate earnings reports closely. Reports were mixed, with many companies warning that inflation was likely to continue to put pressure on operations.

In energy trading on Friday, benchmark U.S. crude rose $1.89 to $90.06 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, gained $1.85 in London to $96.52 a barrel.

In currency trading, the US dollar fell slightly to 147.98 Japanese yen from 148.25 yen. The euro cost 97.80 cents, down from 97.50 cents.

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