Asian stocks were digesting growth concerns in China and rising interest rates in the United States on Tuesday with Hong Kong dropping sharply while Japan edged higher on the back of a plummeting yen.

Chinese growth numbers for the first quarter of 2022 exceeded expectations on Monday but came with a government warning of “significant challenges” ahead, with key economic hubs in the throes of Covid-19 lockdowns.

Millions of residents are still cloistered in their homes in financial capital Shanghai with restrictions -- which have also hit tech hub Shenzhen and the northeastern grain basket of Jilin -- shutting supply lines. Investors were left weighing whether attempts to lift the economy by Chinese policymakers -- who have held off cutting interest rates -- would offset Beijing’s zero-Covid policies.

“The focus in Asia is on mainland policy easing to cushion the impact of lockdowns,” Stephen Innes at SPI Asset Management said, adding that while first-quarter growth was marginally better than predicted, “there was no positive follow-through in China-sensitive assets”.

“Reopening cities is the only fix to drive credit growth, which could translate into a sustainable economic rebound that supports equity markets and a load of other China proxy assets,” he said.

Japan’s Nikkei 225 made gains, and led most Asian markets slightly upward with South Korea, Taiwan, India, and Australia all rising.

But Hong Kong plummeted by its largest margin in three weeks after a four-day holiday hiatus over concerns around Beijing’s tough tech-sector regulations and overall growth in China.

The Hang Seng Index shed more than 2.7 percent before closing at 2.28 percent down, while the Shanghai Composite Index also slipped.

The impact of monetary policy tightening in the United States to combat inflation was another variable watched closely by investors, with major European markets in London, Paris, and Frankfurt resuming trade after a lengthy holiday break in the red on Tuesday.

Based on inflation concerns, pandemic lockdowns in China, and the war in Ukraine, the World Bank last week downgraded its forecast for global growth this year, and the IMF is expected to do the same when it releases its updated forecasts on Tuesday.

“Its current estimate for 2022 is 4.4 percent which it set in January, with Europe and Central Asia likely to take the brunt, due to the Russian war in Ukraine, and Covid restrictions, respectively,” said Michael Hewson, chief market analyst at CMC Markets UK.

“With the return of European markets from the long Easter weekend break we look set to get off to a negative start in the wake of yesterday’s lower finish for US markets, amidst concerns that the growth downgrades seen yesterday could well be the first of many.”

Meanwhile, oil prices fell after initial gains on Tuesday, after Libya’s National Oil Corporation announced the closure of operations after staff in the key export terminal of Zueitina and the Al-Sharara oil field were blocked from working.

The move will prevent Libya from exporting almost a quarter of its 1.2 million barrels per day of production.

And the Japanese yen plunged to yet another 20-year low on Tuesday, reaching 128 to the dollar, a reflection of the continued accommodation of Japan’s monetary policy while US policymakers move to hike interest rates.

“Although the effects of the lower JPY are a net positive for the Japanese economy, positive effects from higher export volume and an increase in inbound foreign tourists have waned and effectively gone,” UBS said in a note.

“More importantly, negative effects are mainly borne by households with negative real income and domestic-oriented industries (mainly small firms) with higher import costs.”

Tokyo stocks ended higher on Tuesday on bargain-hunting after shares dipped following modest falls on Wall Street.

The benchmark Nikkei 225 index added 0.69 percent, or 185.38 points, at 26,985.09, while the broader Topix index gained 0.83 percent, or 15.62 points, to 1,895.70.

The dollar stood at 127.84 yen, having earlier risen past 128 yen, compared with 126.96 yen overnight in New York. The yen’s fall during Tokyo trading helped lift exporter shares.

“Although US shares dropped following Easter, the Nikkei average started by regaining its ground, opening above the 27,000 mark in a rebound after recent losses,” Okasan Online Securities said.

The index however faced selling pressure during the day, as investors waited for opportune moments to buy further.

“Still, the Nikkei moved stably into positive territory in the afternoon session, with the yen trending low and the dollar surging at a level unseen since May 2002,” Okasan said.

Toyota rose 1.02 percent to 2,177 yen. Tokyo Electron, which makes tools to build semiconductors, surged 2.29 percent to 55,420 yen. Advantest, which produces test kits for semiconductors, gained 3.01 percent to 8,550 yen.

Energy developer Inpex jumped 3.80 percent to 1,668 yen. Mitsubishi UFJ Financial Group fell 0.43 percent to 755.3 yen.

Sony Group rose 1.26 percent to 11,280 yen, and SoftBank Group slipped 1.88 percent to 5,547 yen. Fast Retailing, which operates Uniqlo, gave up 1.72 percent to 62,900.

Agencies