Volkswacht Bodensee - Stock markets rise as China hopes boost Hong Kong

The gains come after Federal Reserve boss Jerome Powell's pushback against expectations of a softer approach to interest rate hikes sent shivers through trading floors and ramped up fears of a global recession.

However, the mood lightened in Asia on Friday, as Hong Kong jumped more than five percent on lingering hopes that China will soon begin rolling back its zero-Covid strategy of lockdowns that has hammered the world's second-largest economy. Shanghai ended up more than two percent.

The Hang Seng Index has jumped almost nine percent this week since an unverified statement earlier this week suggested officials in Beijing were discussing a change.

The gains continued despite pushback from authorities, and after President Xi Jinping reasserted the zero-Covid strategy at a major Communist Party gathering last month.

"What we are guessing is China in the future will model the reopening on the back of Hong Kong," Jack Siu, Greater China chief investment officer at Credit Suisse, told Bloomberg Television.

"To fully reopen, we are still at least nine months away from today."

Tech firms were the big winners in Hong Kong, with Alibaba and Tencent up by double digits on reports of progress in US auditing of Chinese firms listed in New York.

Alibaba and Tencent among others have faced delisting from Wall Street owing to a standoff between securities authorities as part of the wider China-US row.

Elsewhere, Sydney, Seoul, Singapore, Taipei, Manila, Jakarta, Bangkok and Wellington rose.

However, Tokyo was deep in the red as traders played catch-up with Thursday's losses after returning from a one-day holiday. Mumbai also fell.

The ongoing optimism about an easing of China's Covid policy lifted oil prices on an expectation that demand will build as the giant economy picks up speed again.

The dollar held gains made after Powell's comments Wednesday. The governor told a news conference that while the size of rate increases would likely come down, they would top out at a higher level than expected, dealing a blow to talk of an end soon.

The decision came as other central banks have signalled they will tone down their hawkishness, even in the face of decades- or record-high inflation.

The Bank of England became the latest on Thursday when it lifted borrowing costs by their most in 33 years -- and to a 14-year high -- but said they would not go as high as markets had priced in.

It also warned that the UK economy faced a prolonged recession -- possibly into 2024 -- as it battles high prices caused by the Ukraine war.

The comments skewered the pound -- already under severe pressure after recent turmoil in Westminster -- and sent it tumbling against the dollar and euro, while it struggled to bounce back in Asia.

Investors are now awaiting the release of jobs data later in the day, which could provide fresh insight into the state of the world's top economy.

With the Fed pointing to a still-strong labour market as a key reason for not shifting from its rate-hike strategy, traders are nervous that a big figure in the report will give officials room to tighten more.

"After initial jobless claims came in line with expectations, Friday's payrolls will be the last vital data point this week, as signals on the labour market remain crucial to the Fed's path forward, and many stock pickers are dearly hoping for 'bad news is good news' close to the week," said SPI Asset Management's Stephen Innes.

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: DOWN 1.7 percent at 27,199.74 (close)

Hong Kong - Hang Seng Index: UP 5.4 percent at 16,161.14 (close)

Shanghai - Composite: UP 2.4 percent at 3,070.80 (close)

London - FTSE 100: UP 0.7 percent at 7,237.13

Pound/dollar: UP at $1.1216 from $1.1160 Thursday

Euro/dollar: UP at $0.9773 from $0.9751

Dollar/yen: DOWN at 147.76 yen from 148.25 yen

Euro/pound: DOWN at 87.16 pence from 87.73 pence

West Texas Intermediate: UP 2.2 percent at $90.07 per barrel

Brent North Sea crude: UP 1.9 percent at $96.44 per barrel

New York - Dow: DOWN 0.5 percent at 32,001.25 (close)

K.Thomson--BTB