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GLOBAL MARKETS – Asian stocks jump as China slashes benchmark for key loans

Band Andrew Galbraith

SHANGHAI, May 20 (Reuters)Asian stocks jumped in early trading on Friday after China cut a key lending benchmark to support a slowing economy, but a gauge of global stocks remained set for its longest streak of weekly losses on record in the amid investor concerns over slow growth.

China cut its five-year prime lending rate (LPR) by 15 basis points on Friday morning, a sharper-than-expected decline, as authorities seek to cushion an economic slowdown, although it left the LPR at one year unchanged. The five-year rate influences mortgage pricing.

Most respondents to a Reuters poll expected a marginal 5 basis point cut in both rates.

MSCI’s broadest index of Asia-Pacific stocks outside of Japan .MIAPJ0000PUS quickly built on early gains after the cut, and last rose 1.4%.

Chinese blue chips were up 1.1% in early trade and Hong Kong’s Hang Seng index .HSI jumped more than 2%, while Australian stocks .AXJO increased by 1.3%. In Tokyo, the Nikkei stock market index .N225 gained 1%.

“While this will certainly not be enough to reverse the headwinds to growth in the second quarter, (the reduction) is a step in the right direction, so markets could react to expectations of stronger easing in the future. future,” said Carlos Casanova, senior economist for Asia at Union Bancaire Privée. in Hong Kong.

Despite gains in Asian equities, MSCI’s All Country World Price Index .MIWD00000PUS was heading into its seventh consecutive week in the red, the longest such week since its inception in 2001. It would also be the longest, including backtested data extending through January 1988.

Concerns about the impact of dilapidated supply chains on inflation and growth prompted investors to dump stocks, with Cisco Systems Inc. CSCO.O On Thursday, it fell to an 18-month low after warning of continued component shortages, citing the impact of COVID lockdowns in China.

On Friday, China’s financial hub of Shanghai announced three new cases of COVID-19 outside quarantine zones, throwing a wrench in the city’s hopes of emerging from its weeks-long strict lockdown.

“The goal of (Chinese) officials has been to come up with easing policies to mitigate the impact of the COVID suppression…The problem is that these easing policies won’t have a real impact until the COVID suppression policy will be strictly enforced,” said Christopher Wood, global head of equities at Jefferies.

The gains in Asia came after a late rally on Wall Street ended, leaving the Dow Jones Industrial Average .DJI down 0.75%, the S&P 500 .SPX 0.58% lower and the Nasdaq Composite .IXIC by 0.26%.

Reflecting the shift in equity risk appetite, US government bond yields rose after China’s LPR decline.

The US 10-year yield US10YT=RR was last at 2.8677%, down from a close of 2.855% on Thursday, while the two-year yield US2YT=RR climbed 2.6364% from a US close of 2.611%.

In foreign exchange markets, the dollar index = USD was 0.08% higher at 102.99 as the safe haven yen JPY= slid against the dollar. The greenback last appreciated 0.23% against the Japanese currency, and the euro USD= was 0.14% lower at $1.0571.

Chinese onshore yuan CNY=CFXS weakened a quarter percent to 6.726 to the dollar, and the offshore yuan more freely traded CNH=D3 weakened past 6.74 to the dollar.

Oil prices remained lower on concerns over economic growth, helped by narrowing crude losses following China’s LPR announcement. Crude Brent LCOc1 was last down 0.37% at $111.63 a barrel and U.S. crude West Texas Intermediate CLc1 was 0.19% lower at $112 a barrel.

Spot gold XUA= was lower, falling 0.2% to $1,838 an ounce. GOL/

Global assetshttp://tmsnrt.rs/2jvdmXl

World currencies against dollar http://tmsnrt.rs/2egbfVh

Emerging Marketshttp://tmsnrt.rs/2ihRugV

Market capitalization of the MSCI All Country World Indexhttp://tmsnrt.rs/2EmTD6j

(Reporting by Andrew Galbraith; Editing by Lincoln Feast)

(([email protected]; +86 21 2083 0079; Reuters Messaging: [email protected]; Twitter: https://twitter.com/apgalbraith))

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