Asia markets gain despite global growth worries

By Scott Murdoch

HONG KONG, May 17 (Reuters) - Asian shares edged higher on Tuesday despite data reinforcing investor fears the global economic recovery may be more fragile than expected, even as inflationary pressures remain high.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.84% on Tuesday, but is still down the index is down 6.7% so far this month. U.S. stocks ended the previous session with mild losses.

In Tokyo, the Nikkei .N225 was flat in early trade, while in Australia the S&P/ASX200 .AXJO index gained 0.34%.

Hong Kong's Hang Seng Index .HSI was 1.2% higher and mainland China's CSI300 Index .CSI300 gained 0.07%.

The U.S. dollar index =USD , which tracks the greenback against a basket of currencies of other major trading partners, was flat in Asian trade to be at 104.1.

Economic growth fears in the world's two largest economies have re-emerged following weak retail sales and factory production figures in China and disappointing U.S. manufacturing data. .

Investors are also weighing the global inflationary impact of lockdowns in China to combat the coronavirus, which have halted factory production in areas across the country.

"One important way China's lockdowns could impact the rest of the world is through its impact on inflation. After all, inflation – and the central bank response – has been a stiff headwind for global bond and equity markets this year," Capital Economics wrote in a note to clients.

The gains on Tuesday in Asian markets follows a mostly weaker U.S. session on Monday.

The S&P 500 SP500 declined 0.4 per cent, while larger losses were incurred on the Nasdaq Composite .IXIC which dropped 1.2 per cent, to 11,664.

The Dow Jones index .DJI was barely positive, up just 0.08%.

"Risk markets were weighed down by concerns over deteriorating global growth prospects," ANZ strategists said in a research note.

"Hugely disappointing Chinese data for April and the plunge in the U.S. Empire State manufacturing index raised anxiety that economic activity may be suffering an abrupt loss in momentum as supply-chain disruption intensifies. The profile of the data suggests that supply issues related to the zero-COVID policy in China are the key factors."

The New York Fed's Empire State manufacturing index published on Monday showed an abrupt fall during May and shipments fell at their fastest pace since the beginning of the pandemic.

In early Asian trade, the yield on benchmark 10-year Treasury notes US10YT=RR rose to 2.8931% compared with its U.S. close of 2.879% on Monday.

The two-year yield US2YT=RR , which rises with traders' expectations of higher Fed fund rates, touched 2.578% compared with a U.S. close of 2.568%.

"Markets currently price the Fed funds rate to be 53 basis points higher at the next meeting in June, and 200 basis points higher by year end," said Imre Speizer, Westpac's head of New Zealand strategy.

The dollar rose 0.06% against the yen to 129.24 JPY= . It is getting closer to its high this year of 131.34.

The European single currency EUR= was up 0.1% on the day at $1.0437, having lost 0.99% in a month.

U.S. crude CLc1 dipped 0.18% to $113.99 a barrel. Brent crude LCOc1 was slightly higher at $114.40 per barrel.

Gold was slightly higher. Spot gold XAU= was traded at $1,826.7072 per ounce.

World FX rates YTD Link
Global asset performance Link
Asian stock markets Link

Reporting by Scott Murdoch in Hong Kong

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