(Bloomberg) — Stocks in Asia extended gains as risk appetite across financial markets got a further boost from China’s latest stimulus measures and upbeat US momentum.
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China’s benchmark CSI 300 Index was set for its biggest weekly gain since 2008 after officials pledged to increase fiscal support and stabilize the property sector to revive growth. The yen weakened 1% against dollar and Japanese bond futures rose as traders speculated that chances are increasing that economic security minister Sanae Takaichi will be the nation’s next leader.
Stimulus in the world’s two largest economies has been a catalyst for markets this week, with China lowering the amount of cash banks must keep in reserve on Friday, ahead of a weeklong holiday. The Federal Reserve’s preferred inflation indicator and a snapshot of consumer demand are both due later Friday, and will provide additional cues on the path for US interest rates.
Today’s Asian market is “totally driven by China stimulus and support to overall global growth as a consequence,” said Matthew Haupt, a portfolio manager at Wilson Asset Management International. “We are still waiting for more stimulus to give this rally more duration.”
The People’s Bank of China unleashed one of the country’s most daring policy campaigns in decades on Tuesday, with Beijing rolling out a strong stimulus package in a push to shore up the slowing economy and investor confidence. The moves sent Chinese shares soaring with the frenzy resulting in delays at Shanghai’s stock exchange.
Holding the politburo “meeting in September rather than waiting until the normally scheduled December meeting is in itself a signal that the authorities are willing to take more urgent action to achieve the 5% growth target,” senior analysts including Robert Carnell at ING Groep NV said in a note. “We saw a more aggressive-than-expected policy package from the PBOC this week and it is reasonable to expect other policies will soon follow.”
Further bullishness came from US economic data overnight while Hong Kong’s tech index hit its highest in over a year. Over in China, bonds slumped as investors favored risk assets instead of havens.
Meanwhile in Japan, the focus is on Takaichi, who argued earlier this week that “it’s stupid to raise rates now” given the merits of a weak yen. If elected she could become Japan’s first female prime minister. The Sankei newspaper reported that former premier Taro Aso intends to have his faction vote for Takaichi in the ruling Liberal Democratic Party’s election.
Adding to the dovish picture, consumer inflation in Tokyo eased this month after outgoing Prime Minister Fumio Kishida reinstated energy subsidies to help households cope with one of the hottest summers on record.
Read: David Tepper Buys ‘Everything’ China-Related on Beijing Easing
Shares of New World Development surged as much as 24% in Hong Kong on Friday, the most since 1998, as the stock resumed trading after being suspended when the indebted firm announced its chief executive officer was stepping down.
As for the US, revised data showed the US economy in better shape than initially expected, spurred mainly by bigger consumer-driven growth fueled by robust incomes. A decline in US jobless claims underscored the resilience of the labor market. But investors tuning into commentary from Fed Chair Jerome Powell on Thursday didn’t get any details on the economic outlook or path for monetary policy.
Futures for US indexes softened Friday after the S&P 500 climbed to its 42nd closing record of this year. The dollar edged higher on Friday, while 10-year US Treasury yields were flat.
In commodities, oil extended a sharp two-day drop, putting prices on course for a substantial weekly decline, on prospects of more supply from OPEC members Saudi Arabia and Libya.
Meanwhile, Sri Lanka’s central bank kept its benchmark interest rates unchanged in its first meeting since a new president was elected and uncertainty over the International Monetary Fund loan program looms.
Key events this week:
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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 were little changed as of 2:26 p.m. Tokyo time
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Nikkei 225 futures (OSE) rose 2.7%
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Japan’s Topix rose 0.5%
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Australia’s S&P/ASX 200 rose 0.1%
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Hong Kong’s Hang Seng rose 3.2%
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The Shanghai Composite rose 2.7%
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Euro Stoxx 50 futures rose 0.2%
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Nasdaq 100 futures were little changed
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.1% to $1.1161
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The Japanese yen fell 1.1% to 146.38 per dollar
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The offshore yuan was little changed at 7.0025 per dollar
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The Australian dollar fell 0.3% to $0.6874
Cryptocurrencies
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Bitcoin rose 0.9% to $65,236.39
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Ether rose 0.5% to $2,643.95
Bonds
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The yield on 10-year Treasuries was little changed at 3.80%
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Japan’s 10-year yield declined three basis points to 0.800%
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Australia’s 10-year yield advanced two basis points to 3.96%
Commodities
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West Texas Intermediate crude fell 0.1% to $67.57 a barrel
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Spot gold fell 0.2% to $2,667.77 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu.
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