Hong Kong (AFP) - Hong Kong led a rally across Asian markets Tuesday on hopes that China's economic engine Shanghai will ease its weeks-long lockdown and gradually reopen businesses, though analysts cautioned there may be little long-term relief.
Much of the city of 25 million has been under stay-at-home orders since April as Beijing attempts to stamp out an Omicron-fuelled virus surge under its strict zero-Covid policy.
Shanghai Vice Mayor Chen Tong said Sunday that the city would gradually reopen businesses starting this week.
Though no details were given and residents were still in their homes on Tuesday, Asian markets cheered the announcement.
"Hopes that the Shanghai lockdowns will ease, along with the ensuing supply chain disruptions, have been enough to lift Asian equities as well, which are staging a modest bounce," said Jeffrey Halley of OANDA.
Tuesday's rally coincided with the third day in a row that Shanghai recorded no Covid-19 cases outside of its quarantine facilities, he said.
"We should continue watching the headline ticker for daily Omicron cases.Most especially, in Shanghai, where if literally one case appears again, any relief rally in Chinese markets could disappear in a puff of smoke."
The impact of Beijing's zero-Covid strategy on the world's second-largest economy was revealed Monday when official data showed retail sales and industrial production in April on-year had slumped to their lowest levels in more than two years.
World markets have also been roiled by surging inflation and Russia's war in Ukraine -- leaving investors jittery.
"Markets remain in fight or flight mode while rolling the dice on recession odds," Stephen Innes of SPI Asset Management said.
"Investors' hopes remain elevated that yesterday's worse than expected Chinese outruns could prove to be a 'whatever it takes' moment, and local policymakers will step hard on the stimulus pedal."
China has announced measures to help young people find jobs, with the urban unemployment rate at its highest in over two years, and officials have lowered the mortgage rate for first-time homebuyers.
On Tuesday Hong Kong closed higher by more than three percent, while mainland China's two indices -- the Shanghai Composite Index and Shenzhen Composite Index -- also saw a bounce.
Manila, Singapore, Seoul, and Sydney were also in positive territory all day.
European markets followed the lead, with Frankfurt, Paris and London all trading up at opening.
Commodities concerns
In commodities trade, wheat prices soared to a record after major producer India banned exports because of a heatwave hitting production.
New Delhi said the move was needed to protect the food security of its 1.4 billion people in the face of lower production and steep global prices.
Worldwide wheat prices had already surged on supply concerns after Russia's February invasion of agricultural powerhouse Ukraine, which previously accounted for 12 percent of global exports.
By Monday's close of the Euronext market, the price of wheat had jumped to 438.25 euros ($456.68) per tonne, breaking the previous closing record of 422.40 struck on March 7, according to trader Damien Vercambre at grains brokerage Inter-Courtage.
Oil also jumped overnight, and by Tuesday US crude benchmark WTI hovered around $114 a barrel.
"The EU's rising tensions with Russia and the resulting uncertainties over the bloc's oil and gas supply remain front and centre," Vandana Hari, founder of Vanda Insights in Singapore, told Bloomberg.
"Having said that, with a $10 jump since last Tuesday, it's hard to see much more upside in crude unless events take a sudden turn for the worse."
Key figures at around 0900 GMT
Hong Kong - Hang Seng Index: UP 3.3 percent at 20,602.52 (close)
Shanghai - Composite: UP 0.7 percent at 3,093.70 (close)
London - FTSE 100: UP 0.6 percent at 7,509.81
Tokyo - Nikkei 225: UP 0.4 percent at 26,659.75 (close)
West Texas Intermediate: UP 0.2 percent at $114.44 per barrel
Brent North Sea crude: UP 0.3 percent at $114.60 per barrel
Euro/dollar: UP at $1.0479 from $1.0436 at 2030 GMT Monday
Pound/dollar: UP at $1.2481 from $1.2323
Euro/pound: DOWN at 83.97 pence from 84.67 pence
Dollar/yen: UP at 129.26 yen from 129.08 yen
New York - Dow: UP 0.1 percent at 32,223.42 (close)
