Morning Chronicle - Asian markets up after China cuts key interest rate

Downcast earning reports from retailers this week have heightened uncertainty in the world markets at a time of rising interest rates, surging energy prices, China's Covid lockdowns and Russia's ongoing war in Ukraine.

Wall Street took a beating Thursday, adding to its very bad week as the markets reacted to back-to-back earnings misses from Walmart and Target which revealed difficulties managing rising costs, as well as weaker-than-expected Chinese economic data.

On Friday morning, China's central bank announced it would lower its five-year loan prime rate -- a key interest rate governing how lenders base their mortgage rates -- from 4.6 percent to 4.45 percent.

The move will help reduce mortgage costs, serving as a boost for demand as China undergoes a property slump and its economy bleeds from stopped ports and factories due to Covid lockdowns.

It is "without doubt a positive in terms of raising the market's sentiment," Niu Chunbao, fund manager at Shanghai Wanji Asset Management, told Bloomberg.

Tokyo, Seoul, Singapore and Sydney all saw a sustained one percent boost, while Hong Kong's Hang Seng led the rally -- up by more than 3 percent in the afternoon.

A strong fiscal stimulus "is also expected" from the central government given persistent headwinds to growth, said Chaoping Zhu, a Shanghai-based global market strategist with JP Morgan Asset Management.

"In addition to the conventional approaches including infrastructure investment and tax deduction, direct subsidies or cash payout to consumers may be adopted to stabilize domestic demand and employment," he said.

Data released this week from China showed the extent of economic pain inflicted by Beijing's strict zero-Covid policy, with retail sales and factory production slumping to their lowest in over two years.

The unemployment rate also climbed in April to 6.1 percent -- the highest in more than two years.

- Recession fears -

Leading indices in recent weeks have see-sawed at even the slightest anticipation of volatility -- or relief -- and the risk of a global recession is "top-of-mind" for investors, said Stephen Innes of SPI Asset Management.

"But as the procession to recession shortens, growth concerns are rising, leaving equities vulnerable to the negative feedback loop," he added.

"What would typically be met with a shoulder shrug, incrementally weaker data can now amplify downside move. And with few positive developments of late, the market remains vulnerable to the prevailing narrative, with the negative feedback loop only growing louder in recent sessions."

Fuelling worries are sky-high inflation across the world. This week, Japan posted consumer price figures for April that were at a seven-year high, while Britain's inflation rocketed to a 40-year peak.

The US Federal Reserve -- where inflation figures are also at a four-decade high -- has tightened monetary policy, and Fed head Jerome Powell has said they would raise interest rates until there is "clear and convincing" evidence that inflation is in retreat.

"There was no single trigger for the negative sentiment prevailing in markets this week, but rather a build-up of concerning information," said Silvia Dall'Angelo, a senior economist at Federated Hermes Limited.

- Key figures at around 0720 GMT -

Hong Kong - Hang Seng Index: UP 3.1 percent at 20,749.58

Shanghai - Composite: UP 1.6 percent at 3,146.57 (close)

London - FTSE 100: UP 1.3 percent at 7,396.82

Tokyo - Nikkei 225: UP 1.3 percent at 26,739.03 (close)

West Texas Intermediate: DOWN 0.5 percent at $111.65 per barrel

Brent North Sea crude: DOWN 0.3 percent at $111.75 per barrel

Euro/dollar: DOWN at $1.0572 from $1.0586 at 2030 GMT Thursday

Pound/dollar: DOWN at $1.2471 from $1.2473

Euro/pound: DOWN at 84.77 pence from 84.84 pence

Dollar/yen: UP at 127.96 yen from 127.80

New York - Dow: DOWN 0.8 percent at 31,253.13 (close)

-- Bloomberg News contributed to this story --

C.Osborn--MC-UK