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Friday, January 28, 2022

Asia stock markets seen cautious on China growth worries, dollar up

By Cecile Lefort

SYDNEY (Reuters) – Asian stock markets are set for a cautious start on Monday as another set of soft data from China over the weekend rekindled global growth worries, but any selling may be contained on easing concerns that the massive U.S. stimulus could be scaled back in the near future.

The U.S. dollar rose on Friday on resilient U.S. jobs data, while Wall Street rallied as investors came round to the view that the Fed would need to see firm evidence of economic strength before scaling back its bond-buying program.

New Zealand shares <.nz50> opened modestly firmer, while Australian markets are closed for a public holiday.

MSCI’s broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> ended Friday down 1.07 percent.

The U.S. dollar jumped three-quarters of a yen in early Asian trading to hit 98.36, well off a two-month low around 95 yen hit on Friday.

Against a basket of currencies, the dollar rose 0.2 percent (.DXY), pulling back from its lowest since February hit last week.

On Friday, the U.S. Labor Department’s data showed job gains of 175,000 in May, slightly above the economists’ forecast. But the unemployment rate increased to 7.6 percent from 7.5 percent in April, easing concerns that the Fed may be reducing its stimulus in the near future, boosting U.S. stocks.

The dollar’s extended rally from Friday may have been driven by safe-haven demand after weekend data in China showed unexpected weakness in May trade and domestic activity struggling to pick up.

The data underscores rising risks that China’s economic growth will slide further in the second quarter, dealing a blow to global growth prospects as investors fret over an uneven recovery in the U.S. and a deep slump in Europe.

“The China train is hardly derailing, but it does seem to be running out of puff somewhat for the moment,” wrote ANZ Bank, having revised GDP growth expectations to 7.6 percent this year, from 7.8 percent.

The Antipodean currencies were the hardest hit with the Australian dollar plumbing more than one percent to $0.9413, its lowest in 20 months.

It fell as deep as $0.9393 in early trade, very near key support of $0.9388. A break would take it to the lowest since September 2010.

The Aussie dollar has lost 12 percent in just two months.

The kiwi dollar slipped 0.6 percent to $0.7836, pulling closer to its lowest in 11 months.

Australia and New Zealand are very sensitive to news out of China, a key export market.

(Editing by Shri Navaratnam)

SOurce: Reuters

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