* MSCI Asia ex-Japan +1.8%, Nikkei +1.3%
* European shares set to follow Asia's lead
* Equities rally after China cuts loan prime rate
* Global equities set for 7th weekly loss
By Andrew Galbraith
SHANGHAI, May 20 (Reuters) - Asian shares jumped on Friday
after China cut a key lending benchmark to support a slowing
economy, but a gauge of global equities remained set for its
longest weekly losing streak on record amid investor worries
about sluggish growth.
China cut its five-year loan prime rate (LPR) by 15 basis
points on Friday morning, a sharper cut than had been expected,
as authorities seek to cushion an economic slowdown by reviving
the housing sector. The five-year rate influences the pricing of
mortgages.
MSCI's broadest index of Asia-Pacific shares outside Japan
quickly built on early gains after the cut and
was last up more than 1.8%.
European equities were set to follow Asia's lead, with
pan-region Euro Stoxx 50 futures, German DAX futures
and FTSE futures all up more than 1%.
Chinese blue-chips also rose 1.8%, boosted by foreign
buying, and Hong Kong's Hang Seng index jumped more than
2%, while Australian shares rose 1.1%. In Tokyo, the
Nikkei stock index gained 1.3%.
"While it certainly will not suffice to reverse growth
headwinds in Q2, (the cut) constitutes a move in the right
direction so markets might be reacting to expectations of
stronger easing going forward," said Carlos Casanova, senior
Asia economist at Union Bancaire Privee in Hong Kong.
Despite the gains in Asian shares, MSCI's All-Country World
Price Index remained headed for its seventh
straight week in the red, the longest such stretch since its
inception in 2001. It would also be the longest including
back-tested data extending to January 1988.
Concerns over the impact of battered supply chains on
inflation and growth have prompted investors to dump shares,
with Cisco Systems Inc (CSCO) on Thursday tumbling to an
18-month low after it warned of persistent component shortages,
citing the impact of China's COVID lockdowns.
On Friday, China's financial hub of Shanghai bruised
residents' hopes for a smooth end to restrictions as it
announced three new COVID-19 cases outside of quarantined areas
- though plans to end a prolonged city-wide lockdown on June 1
appeared to remain on track.
Industrial output in the city shrank more than 60% in April
from a year earlier due to the impact of coronavirus
restrictions.
"The focus of (Chinese) officials has been to come up with
easing policies to mitigate the impact of COVID suppression ...
The problem is that such easing policies will not have any real
impact so long as the COVID suppression policy is tightly
enforced," said Christopher Wood, global head of equities at
Jefferies.
The gains in Asia came after a late rally on Wall Street
petered out, leaving the Dow Jones Industrial Average
down 0.75%, the S&P 500 0.58% lower and the Nasdaq
Composite off by 0.26%.
STRONGER YUAN
In the currency market, the dollar index retreated
from small earlier gains to nudge down 0.12% to 102.79, heading
for its first losing week in seven.
Moves elsewhere were muted, with the dollar just on the
stronger side of flat against the safe-haven yen at
127.76. The euro was barely higher at $1.0586, erasing
earlier losses.
China's onshore yuan logged bigger moves, turning
around from a 0.32% dip to strengthen to a two-week high of
6.6699 per dollar. The more freely traded offshore yuan
also hit a two-week high at 6.6855 per dollar.
While longer-dated U.S. government bond yields ticked higher
following China's LPR cut, mirroring gains in equities, they
later moderated.
The U.S. 10-year yield was last at 2.855%, flat
from Thursday's close, and down from a top of 2.922% earlier on
Friday. The two-year yield climbed to 2.6327%
compared with a U.S. close of 2.611%.
Crude prices pared losses after China's LPR announcement but
later extended falls on worries a demand recovery could falter.
Brent crude was last down 0.53% at $111.45 per
barrel and U.S. West Texas Intermediate crude was 1.21%
lower at $110.85 per barrel.
Gold bounced higher and was set for its first weekly gain
since mid-April, helped by the weaker dollar. Spot gold,
rose 0.26% to $1,846.49 per ounce.
(Reporting by Andrew Galbraith; Editing by Lincoln Feast and
Sam Holmes)
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