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Asian shares jump as Chinese leaders pledge help for economy

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By ELAINE KURTENBACH

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On China.

The COVID situation remains very uncertain, with China’s major cities ramping up virus testing, around their zero-COVID policy, raising the possibility of further lockdowns outside Shanghai. Hangzhou (an e-commerce hub) has started a mass testing drive, while the outbreak in Shanghai appears to be stabilizing a little..

Even with the State Council’s latest pledge to step up policies to stabilize employment and help businesses resume operation amid the outbreak, both the Shanghai and Shenzhen indexes are set to drop a total of 8% and 11% for the month, respectively, for their second straight monthly loss.

On the currency side, the offshore yuan depreciated past 6.61 per dollar on Thursday (currently trading 6.61431 as of this writing), extending its recent slide to its lowest in over a year, meaning that the yuan has lost about 4% in about two weeks. China’s central bank has announced a cut in the reserve requirement ratio for foreign currency deposits - to 8% from 9%, starting May 15th - aimed at supporting their falling currency.

President Xi Jinping’s call for an “all-out” campaign to build infrastructure, marking the latest attempt to boost growth in the Covid-battered economy. This follows earlier numbers showing profits earned by China's industrial firms increased by 8.5% YOY to 19.56 T CNY in 1Q 2022. Profits grew both at state-owned industrial firms (19.5%) and private-sector (3.2%), despite large production challenges. TradingEconomics.

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Elsewhere.

France's economy unexpectedly showed no growth in Q1 of 2022, compared with market forecasts of a 0.3% expansion, and after an upwardly revised 0.8% rise in Q4, according to flash data. Household consumption shrank amid surging energy costs. Year-on-year, the GDP advanced 5.3% in Q1, after an upwardly revised 5.5% in Q4.

Annual inflation rate in France accelerated to 4.8% in April of 2022, the highest since October of 1985, and above market forecasts of 4.5%, preliminary estimates showed. PPI in France climbed 4.3% MoM in March of 2022, sharply quickening from a downwardly revised 0.9% increase in February.

Vietnam's annual inflation rate increased to an eight-month high of 2.64% in April of 2022 from 2.41% in the previous month. On a monthly basis, consumer prices were up 0.18% in April, easing from a 0.7% rise in the prior month.

EU natural gas futures retreated below the €100 per megawatt-hour mark, weighed down by forecasts of warmer weather and reports that European utilities have been finding ways of paying to Gazprom without breaching EU sanctions. Hungary said it was paying for natural gas with euros and allowing the Russian state-owned company to convert those into rubles. Concerns over Russian supplies faded amid reports of steady flows in the Nord Stream 1 pipeline, while Poland has been buying natural gas from Germany. On a monthly basis, the contract is set to fall 17.6%, its first monthly decline this year, but should gain 2.2% on the week.

TradingEconomics

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Investors will get another update Friday on spending, a barometer for the economy as everything from food to clothing and gas becomes more expensive, when the Commerce Department releases its personal income and spending report for March.

The U.S. numbers are in, and personal spending in the US rose 1.1% from a month earlier in March, above market expectations for a 0.7% increase. Personal income went up 0.5%, also above forecasts. The result was 1.10. It was previously 0.60. Historic high reading was 8.60 and the lowest was -12.60.

Personal consumption expenditures (PCE) shows how much of the income earned by households is being spent on current consumption as opposed to how much is being saved for future consumption.

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The U.S. personal consumption expenditure price index (aka, the Fisher Price Index) is also in, showing a climb of 6.6% YoY in March, quickening from a downwardly revised 6.3% increase in February. It was the steepest rise since the series began in 1959, reflecting increases in goods and services. Energy prices increased 33.9%, while food prices increased 9.2%. Excluding food and energy, the PCE price index rose 5.2% from one year ago.

Q1 U.S. compensation costs for civilian workers numbers show an increase of 1.4% QoQ, rising from a 1.0% rise the previous quarter, and faster than market expectations of a 1.1% rise. Wages and salaries increased 1.2% and benefit cost went up 1.8%.

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The Commerce Department reported Thursday that the U.S. economy shrank last quarter for the first time since the pandemic recession struck two years ago

Worst start to the S&P year since 1939.

worst nasdaq since 2008.

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