A man passes by an electric monitor displaying the Nikkei stock average and the Japanese yen exchange rate against the US dollar outside a brokerage on May 2, 2023 in Tokyo, Japan. REUTERS/Issei Kato acquires licensing rights
- Asian stock market:
- China’s blue chips jump 3% on policy support
- Nikkei rose 1.5%, S&P 500 futures rose 0.1%
- Dollar strengthens on yen, based on higher 2-year yields
- US payrolls, EU inflation, China PMIs due this week
SYDNEY, Aug 28 (Reuters) – Asian shares rose on Monday as China announced new measures to prop up its ailing markets, although the mood was cautious ahead of readings on US jobs and inflation that could decide Whether interest rates should rise again or not.
Beijing announced on Sunday it would halve stamp duty on stock trading and take steps to support the housing market in the latest attempt to boost the struggling market.
The help was needed as profits at China’s industrial companies plunged 6.7% in July from a year earlier, extending the slump to a seventh month this year.
Investors welcomed any help they could get, and Chinese blue chips (.CSI300) jumped 3.0% in volatile trade, falling below year-to-date lows.
All eyes now turn to the official PMI for August on Thursday, which is still expected to show activity in the red.
“We believe these latest measures are in line with directives from the July Politburo meeting, when officials pledged to revive China’s capital markets, but to revive the real economy,” wrote analysts at Nomura. do not represent a meaningful increase in policy support.” A Comment.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) climbed 1.4%, adding a modest gain last week and breaking a three-week losing streak.
Japan’s Nikkei (.N225) rose 1.5%, supported partly by continued weakness of the yen.
Eurostox 50 futures rose 0.7% on improving risk sentiment, while FTSE futures were closed for the holiday. S&P 500 futures and Nasdaq futures both added 0.1%, extending last week’s modest gains.
Markets managed to weather a slightly dovish stance from Federal Reserve Jerome Powell, who reiterated he may have to raise rates again but promised to move “carefully”.
“We interpret this to mean that the FOMC does not intend to hike at its September meeting,” wrote analysts at Goldman Sachs.
“We expect the FOMC will ultimately decide that further tightening of policy is unnecessary, making the July FOMC meeting the last of the hike cycle.”
Futures show a near 80% chance of a steady outcome at the September 20 meeting, but a 58% chance of a higher end of the year.
negative impact on jobs
Much will depend on the flow of US data that was coming hot last week after a batch of manufacturing surveys pointed to a slowdown both at home and abroad.
That raised the stakes for this week’s ISM survey on manufacturing, along with reports on payrolls, core inflation and consumer spending.
The median forecast is for payrolls to rise by 170,000 in August, with the unemployment rate holding steady at 3.5%.
JPMorgan analysts cautioned that the entertainment industry strike in Hollywood could reduce job growth and increase by only 125,000.
EU inflation data this week could also be helpful in deciding whether the European Central Bank decides to hike next month.
Markets are evenly divided on whether there will be another 3.75% rate hike, with ECB President Christine Lagarde stressing on Friday that policy needed to turn restrictive.
It was a common theme among western central banks, with Bank of England deputy governor Ben Broadbent saying over the weekend that rates may have to remain high “for quite some time now”.
The oddest person was Bank of Japan Governor Kazuo Ueda, who on Friday reiterated the need to keep policy extremely loose.
That divergence kept the yen under pressure and the dollar was steady at 146.50 early Monday, only slightly below Friday’s 10-month top of 146.64. The euro was close to 158.27 yen, its highest since October last year.
The single currency had less luck against the dollar, which received broad support from higher Treasury yields, and slipped for six consecutive weeks to $1.0801.
On Friday, yields on US two-year notes rose to 5.104% after touching their highest level since early July.
Higher yields and a stronger dollar have been headwinds for gold, which was inactive at $1,915 an ounce.
Oil prices took some support from a sharp rise in diesel prices in the US, although concerns over Chinese demand remained.
Brent rose 22 cents to $84.70 a barrel, while US crude advanced 21 cents to $80.04.
Reporting by Wayne Cole; Editing by Mr Navaratnam and Stephen Coates
Our Standards: The Thomson Reuters Trust Principles.
Get Licensing RightsOpens new tab
