HONG KONG: Asian markets mostly fell on Thursday after Chinese Premier Li Keqiang said the world's second-largest economy was, in some ways, worse off now than during the early days of the coronavirus pandemic.

Li's comments dealt a blow to confidence from the start and overshadowed a positive lead from Wall Street, which was fueled by the release of minutes indicating a less hawkish stand from the Federal Reserve (Fed).

The wind was immediately taken out of traders' sails as they digested the warning, which comes as China stubbornly sticks to a zero-Covid policy to eradicate the fast-spreading Omicron variant of the coronavirus in the country.

The economic agony caused by lockdowns and other strict containment measures hammered growth across the East Asian country and sent shockwaves globally as key supply chains were brought to a halt.

Data in recent weeks have shown that a series of pledges by Beijing to kickstart growth has essentially fallen flat owing to a lack of concrete action, while analysts say the easing of the Covid policy was the only thing investors wanted to see.

Get the latest news
delivered to your inbox
Sign up for The Manila Times’ daily newsletters
By signing up with an email address, I acknowledge that I have read and agree to the Terms of Service and Privacy Policy.

"Economic indicators in China have fallen significantly, and difficulties in some aspects and, to a certain extent, are greater than when the epidemic hit us severely in 2020," Li told an emergency meeting on Wednesday with representatives from local governments, state-owned companies and financial firms.

He also urged officials to work to reduce unemployment.

There is a general feeling among commentators that China's economic growth will fall well short of the government's target of about 5.5 percent. Expansion came in at only 2.2 percent in 2020.

S&P Global Ratings this month lowered its full-year growth forecast for China from 4.9 percent to 4.2 percent, while Nomura analysts warned in a recent note that there is "increasing potential for negative GDP (gross domestic product) growth in the second quarter."

Economists at Goldman Sachs said "Chinese policymakers are in greater urgency to support the economy after the very weak activity growth in April, anemic recovery month-to-date in May and continued increases in unemployment rates."

Hong Kong, Tokyo, Sydney, Seoul, Taipei and Wellington were all down, while Shanghai, Mumbai, Singapore, Bangkok and Manila edged up. In Europe, London, Paris and Frankfurt were up in early trade.

Traders had been given a positive lead from Wall Street as minutes from the Fed's May policy meeting indicated that while officials would probably hike rates by 50 basis points at each of the next two gatherings, they were aware of the impact on the economy.

With inflation surging, the United States central bank — and its counterparts around the world — has been forced to tighten policy, but that has hammered markets and sparked fears of a recession.

The minutes also made no mention of a 75-basis-point lift, providing some relief to beleaguered investors.

"If inflation gets tame enough over [the] summer, there may not be continued raising of rates," Carol Pepper of Pepper International said on Bloomberg Television.

She added that the long-feared era of stagflation — when prices rise but growth remains flat — was unlikely.

"I think we are going to be in a situation where inflation will start tapering down and then we will start going into a more normalized market," she said.