Market Close May 18

Investors lifted as shutdowns ease in many countries

Gold hits a 7-year high on negative rate spectre; India stimulus measures disappoint; Japan economy shrinks less than feared

Investors lifted as shutdowns ease in many countries
Gold prices for the day are seen on a shop window on 15 April 2020. A month on and the price of gold has hit a seven-year high. Photo: Pornprom Satrabhaya /Bangkok Post via AFP

(ATF) Hong Kong: Financial markets rallied as investors drew relief from economies reopening and gold prices hit a seven-year high after Federal Reserve chairman Jerome Powell portrayed a gloomy outlook for the world’s largest economy.

Powell forecast the US economy could collapse by 20-30% this quarter, and unemployment may peak at 20-25%. But his assessment that 'it should be a much shorter downturn than the 1930’ and that “there'll be positive growth in the third quarter” brought some relief.

“As central banks pump an unlimited amount of monetary stimulus into the economy, real yields are likely to stay anchored around zero or negative long after the crisis has abated. This backdrop should support gold investment demand,” Schroders’ Strategist Sean Markowicz, and Fund Manager James Luke said.

Gold rose 1% to $1,762 per ounce, with BofA Securities projecting it would hit $1,800 by the year end.

Japan’s Nikkei 225 inched up 0.48% as the economy shrank by less than expected in the first quarter and the materials sector drove Australia’s S&P ASX 200 1.03% higher with oil rising above $30 for the first time in a month.

Regionally, the MSCI Asia Pacific index climbed 0.58%. Hong Kong’s Hang Seng benchmark climbed 0.58% and China’s CSI 300 share index advanced 0.26%.

But Indian stocks fell, with the NSE Nifty down 3.43%, after the government’s stimulus measures failed to enthuse markets. The government also announced an extension of the lockdown till the end of the month. Investors had hoped for immediate spending boost to revive the economy, but instead the government has chosen to focus on the medium term.

“At an aggregate level, the cumulative measures will help partly ease the cash squeeze felt by MSMEs, but not fully resolve the current demand shock in the face of the coronavirus,” DBS economist Radhika Rao said in a note. “Timely implementation will help the economy improve its trend growth in the medium-term and attract suitable domestic/ foreign risk capital.”

Credit markets also gained, with the Asia IG index tightening 2 basis points to 116/117 and sovereign names moving in 1-3 bps. HongKong Land mandated banks for a bond issue to launch on Tuesday, while Nanjing Jiangbei announced price guidance for a short-dated bond.

ATF China Bond 50 Index:

Also on Asia Times Financial

CNOOC, Shell to build new ethylene project

China, Huawei decry toughened US blockade 

Trump bets the farm on Huawei equipment ban  

China hits 'fast forward' on 5G 

Foreign Exchange: New 100-million lockdown in NE China hits Asian currencies

Asia Stocks

· Japan’s Nikkei 225 climbs 0.48%

· Australia’s S&P ASX 200 advances 1.03% 

· Hong Kong’s Hang Seng index gains 0.58%

· China’s CSI300 up 0.26%

· India’s Nifty 50 tumbles 3.43%

· The MSCI Asia Pacific index adds 0.58%.

Stock of the day

Shandong Gold rose as much as 9.2% after gold prices surged to a 7-year high and with BofA Securities forecasting more gains ahead for the yellow metal.