New China stimulus drive Asia shares, EU markets up, US equities little changed
ALBAWABA – Asia markets rose Monday after United States (US) Federal Reserve (Fed) chief Jerome Powell said the central bank will most likely pin US interest rates next month amid new China stimulus to boost financial markets.
Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Seoul, Taipei, Jakarta and Wellington all rose between 1.7 percent and 2.5 percent on Monday, according to Agence France-Presse (AFP).
Overall, MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1 percent, breaking a three-week losing streak, Reuters reported.
Japan's Nikkei rose 1.6 percent, underpinned in part by the persistent weakness of the yen, and EUROSTOXX 50 futures added 0.7 percent.
While FTSE futures were closed for a holiday, S&P 500 futures and Nasdaq futures both edged up 0.1 percent, extending last week's modest rise, the Canada-based news agency reported.
Chinese stocks soared as Asia markets rallied on new China stimulus and the US Fed announcing probable pin in interest rates next month - Shutterstock
Shanghai and Hong Kong markets soared at the open after China announced slashing the tax paid on stock trades for the first time since 2008, according to AFP.
Both the CSI 300 and the Shanghai Composite indexes were on course for the biggest gains in a month, Bloomberg reported.
Fed Chief optimistic about pinning US interest rates, drives EU, Asia market rally
In a much-anticipated speech Friday, Powell suggested that US interest rates would be held at the 22-year high of 5.25-5.5 percent next month, according to AFP.
Nonetheless, the US central bank boss left the door open to more tightening, while repeating his pledge that decision-making would be data-dependent as policymakers try to bring inflation to heel.
Even though inflation is coming down, markets have been hit in recent weeks by a strong run of economic data, particularly on jobs.
Notably, a strong labor market indicates sticky inflation mechanisms underpinning the economy.
Federal Reserve chief Jerome Powell announced Fed may pin interest rates in September, driving stocks and Asia markets on Monday - AFP
"If the data continues to show an ease in labour market tightness and price pressures, then the Fed is likely done with its tightening cycle," National Australia Bank's Rodrigo Catril told AFP.
"If the data doesn't play ball, then further tightening should be expected. Thus, upcoming key market data releases (inflation and labour market) are likely to set the tone for markets over coming months."
Powell’s remarks sent US stocks lower initially before they bounced to end Friday on a positive note, AFP reported.
Median forecasts show US payrolls will rise 170,000 in August with a steady jobless rate of 3.5 percent, according to Reuters.
Upcoming data will help guide predictions and forecasts on the status of the US economy and interest rates.
Elsewhere, this week in Asia will be a busy one for investors with more than 360 members of the MSCI Asia Pacific Index expected to announce results in the highest weekly tally this season, according to Bloomberg. Traders will watch for signs of corporate profits bottoming out, which may support further gains in Asian equities.
Strong optimism as Asia markets rally on new China stimulus
The Ministry of Finance and State Taxation Administration said in a joint statement the new China stimulus was designed to "invigorate the capital market and boost investor confidence".
Chinese officials also said they would slow the pace of new initial public offering and listings, which usually suck up market liquidity, according to AFP.
Authorities have introduced a number of measures as part of a new China stimulus package to stimulate staggering demand - Shutterstock
"The scale, force and speed of the measures all beat expectations," said analysts at China International Capital Corp.
"The increasing force of the policy tools will lift market confidence, amplifying the positive signal for the market," AFP reported them as saying.
However, Neo Wang, at Evercore ISI warned that stocks were unlikely to rally unless authorities announce a huge stimulus package similar to the so-called "bazooka" in 2008.
In the meantime, all eyes turn to US Commerce Secretary Gina Raimondo's talks with Chinese counterparts in the latest bid to ease trade tensions between the world's two largest economies.
China’s flagging real estate sector braces for crash as Asia markets rally
On China’s flagging real estate front, Hong Kong also saw trading in troubled Chinese property giant Evergrande restarted after a 17-month suspension for not publishing its financial results.
The firm collapsed more than 80 percent in early trading sessions, having finally released its earnings on Sunday, AFP reported.
Evergrande lost $4.53 billion in the first half of 2023 and has only $556 million in cash assets.
China's construction sector is struggling with crippling debt as real estate giant Evergrande restarts trading amid Asia markets rally - Shutterstock
Once China's largest real estate firm, Evergrande defaulted in 2021 and is now saddled with more than $300 billion in liabilities.
The company soon became the symbol of China’s nationwide property crisis, which many fear could spill over globally, according to AFP.
Evergrande’s creditors will vote later today, Monday, on a proposal by the company regarding its offshore debt that is shaping up to be one of China's biggest debt restructurings ever.
Meanwhile, China biggest private developer, Country Garden, announced Monday that its massive Malaysia project, Forest City, is on track, after the Malaysian government issued a number of incentives for the project, according to Reuters. The company's shares rose 8 percent on the announcements.
US, EU and Asia market summary by AFP and Bloomberg
S&P 500 rose 0.7 percent
Nasdaq 100 rose 0.85 percent
Japan’s Topix rose 1.3 percent
Australia’s S&P/ASX 200 rose 0.5 percent
Hong Kong’s Hang Seng rose 1.2 percent
Euro Stoxx 50 futures rose 0.7 percent
New York - Dow: UP 0.7 percent at 34,346.90 (close)
Tokyo - Nikkei 225: UP 1.7 percent at 32,154.03 (break)
Hong Kong - Hang Seng Index: UP 2.1 percent at 18,338.21
Shanghai - Composite: UP 2.5 percent at 3,139.05
Dollar/yen: UP at 146.50 yen from 146.44 yen on Friday
Euro/dollar: UP at $1.0807 from $1.0797
Pound/dollar: UP at $1.2601 from $1.2578
Euro/pound: DOWN at 85.76 pence from 85.82 pence
