(Bloomberg) — Stocks in Hong Kong are poised to lead Asian equities higher after China’s top leaders used their most direct language on stimulus in years.
Most Read from Bloomberg
Futures showed the Hang Seng Index is poised to jump more than 3%, while Tokyo is set for a modest advance and Sydney opened little changed. Contracts for the S&P 500 were little changed after the US benchmark declined on Monday. The Nasdaq Golden Dragon China Index, which tracks the biggest Chinese stocks in the US, jumped 8.5% in its strongest gain since late September, and oil rose. Chinese 10-year bonds gained for a fourth straight session on Monday.
China’s Politburo vowed to embrace a “moderately loose” strategy for monetary policy in 2025, marking its first major shift in stance since 2011. The top leaders pledged to take a “more proactive” approach on fiscal policies, stabilizing property and stock markets, while promising to “forcefully lift consumption.” Investors will now shift focus to China’s annual closed-door Central Economic Work Conference, which is set to take place later this week.
The statement “had the positive message regarding household consumption,” Geoffrey Yu, a strategist at Bank of New York Mellon Corp. said in an interview with Bloomberg Television. A relentless drop in Chinese 10-year bond yields may have increased the urge among Beijing’s policymakers to lift expectations, he said.
In commodities, industrial metals such as copper, zinc and iron ore rose after the announcement. China dominates demand for most metals, and the prospect of rate cuts and increased stimulus spending will be welcomed by investors.
“Resource markets have been eagerly anticipating tougher talk from Chinese authorities,” said Gavin Wendt, founding director of industry analyst MineLife. “It appears that base metals markets have firmed the most, perhaps indicating that commodities related to consumer demand might be the immediate beneficiary.”
Separately, manufacturers in China have begun limiting sales to the US and Europe of key components used to build unmanned aerial vehicles that have become a vital part of Ukraine’s defense. The moves are a prelude to broader export restrictions on drone parts that western officials expect Beijing to enforce in the new year, according to people who asked not to be identified.
Elsewhere in Asia, traders will continue to monitor assets in South Korea as President Yoon Suk Yeol was banned from traveling overseas. The won closed 0.5% weaker against the dollar on Monday.
Inflation Data
In the US, the S&P 500 dropped from nearly overbought technical levels, following a series of all-time highs, with traders awaiting key inflation data that will help shape the outlook for Federal Reserve rates. Nvidia Corp. slid as China opened a probe over suspicions the giant US chipmaker broke anti-monopoly laws around a 2020 deal.
Data including Wednesday’s consumer price index will offer Fed officials a final look at the pricing environment ahead of their meeting the following week. Any indication that progress has stalled on the inflation front could well undercut the chances of a third straight reduction in rates.
“This Wednesday’s inflation data may hold the key to the Fed’s next move,” said Jay Woods at Freedom Capital Markets. “So far results have been in line with economists’ expectations and haven’t scared the market. However, an upward surprise should raise eyebrows at the Fed and could put another rate cut on pause.”
The S&P 500 fell 0.6%. The Nasdaq 100 slid 0.8%. Treasury 10-year yields rose four basis points to 4.20%. The Bloomberg Dollar Spot Index rose 0.1%. The Australian and New Zealand dollars led gains after the China stimulus news, with the Reserve Bank of Australia expected to hold interest rates later Tuesday.
Key events this week:
China trade, Tuesday
Australia rate decision, Tuesday
US CPI, Wednesday
Canada rate decision, Wednesday
ECB rate decision, Thursday
US initial jobless claims, PPI, Thursday
Eurozone industrial production, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 8:14 a.m. Tokyo time
Hang Seng futures rose 3.4%
Australia’s S&P/ASX 200 was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0555
The Japanese yen was little changed at 151.36 per dollar
The offshore yuan was little changed at 7.2676 per dollar
The Australian dollar was little changed at $0.6438
Cryptocurrencies
Bitcoin rose 0.4% to $97,367.07
Ether rose 0.7% to $3,727.89
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
