(Bloomberg) — Asian shares gained for a fifth day as a rally sparked by support measures from Beijing continued, while US stocks set fresh highs, with investors preparing for further rate cuts.
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Stocks in China and Hong Kong extended gains after the People’s Bank of China on Tuesday unveiled a sweeping stimulus package to support the economy and financial markets. Shares also rose in Taiwan, South Korea and Australia, while those for Japan slipped.
“Within Chinese equities, we anticipate near-term support on the stimulus news, contingent on evidence of effective execution,” said Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management. “We expect rate cuts and capital market support to benefit state-owned enterprises concentrated in high-dividend sectors, including utilities, telecoms, energy firms, and financials.”
From equities to currencies, markets already encouraged by the Federal Reserve’s outsized rate cut last week got a boost from the slew of measures announced by China to stimulate its economy, sending the regional gauge around its highest levels since February 2022. Emerging Asian currencies also jumped, led by the Malaysian ringgit and Thai baht.
Hong Kong’s short sales ratio as a percentage of market turnover dipped to 13.6% on Tuesday, one standard deviation below average since 2016, indicating many shorts have already been covered, according to JPMorgan.
In another potential boost for equities, the People’s Bank of China cut the one-year medium-term lending facility rate to 2% from 2.3%.
Support measures unveiled by Chinese authorities Tuesday included interest rate cuts, more cash for banks, bigger incentives to buy homes and plans to consider a stock stabilization fund. However, the efforts may only buy China some time given the scale of challenges facing the economy.
Treasury yields were little changed after edging lower Tuesday as US data showed signs of fragility in the economy, while an index of greenback strength fell to trade near the lowest level this year. A gauge of emerging market currencies set a fresh record high.
Overnight in the US, the reading on the Conference Board’s gauge of consumer sentiment posted the biggest drop since August 2021. The report also flagged concerns about a slowdown in the labor market while manufacturing data also came in weaker than expected.
“The decay in the perceptions of jobs available was striking,” according to Carl Weinberg, chief economist at High Frequency Economics. “It also will deliver a warning message about the state of the economy to financial markets.”
Swaps traders increased their wagers to more than three-quarters of a point of policy easing by year-end from the Federal Reserve, suggesting at least one more major US cut is in store, after the data. Investors are awaiting data on the Fed’s preferred price metric and US personal spending later this week for further clues on the depth of future reductions.
Fed Governor Michelle Bowman, the only policymaker to dissent on last week’s half-point cut, said the central bank should lower interest rates at a “measured” pace, in Tuesday comments. She said that inflationary risks remain and that the labor market has not shown significant weakening.
Oil steadied after its biggest advance in more than a week, as traders tracked developments in the Middle East and the impact on demand of China’s stimulus measures. Gold hit a record trading above $2,662 an ounce.
In the corporate world, Japanese memory chipmaker Kioxia Holdings Corp. is pushing back plans for an initial public offering until later this year after a downturn in semiconductor stocks.
Key events this week:
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ECB President Christine Lagarde speaks, Thursday
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US jobless claims, durable goods, revised GDP, Thursday
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Fed Chair Jerome Powell gives pre-recorded remarks to the 10th annual US Treasury Market Conference, Thursday
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China industrial profits, Friday
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Eurozone consumer confidence, Friday
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US PCE, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.1% as of 10:41 a.m. Tokyo time
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Nikkei 225 futures (OSE) fell 0.3%
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Japan’s Topix was little changed
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Australia’s S&P/ASX 200 rose 0.2%
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Hong Kong’s Hang Seng rose 2.7%
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The Shanghai Composite rose 2.7%
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Euro Stoxx 50 futures fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.1189
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The Japanese yen was little changed at 143.37 per dollar
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The offshore yuan was little changed at 7.0088 per dollar
Cryptocurrencies
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Bitcoin rose 0.7% to $64,668.63
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Ether rose 0.6% to $2,667.84
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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