Asian Stock Markets Rally as China Introduces Support Measures
SYDNEY, Aug 28 (Reuters) – Asian shares rallied on Monday as China announced new measures to support its struggling markets. However, the market mood remained cautious as investors awaited key economic data from the United States that could impact interest rate decisions.
On Sunday, Beijing announced it would halve the stamp duty on stock trading in an attempt to boost the market. The Chinese securities regulator also approved the launch of 37 retail funds. These measures came as China’s industrial profits fell 6.7% in July, marking the seventh consecutive month of decline.
Investors welcomed the support measures, leading to a 1.5% increase in Chinese blue chips in choppy trading. The market is now focused on the official Purchasing Managers’ Index (PMI) for August, set to be released on Thursday, which is expected to show continued weakness in activity.
“We believe these latest measures are in line with the directive from the July Politburo meeting, when the authorities pledged to invigorate China’s capital markets, but do not represent a meaningful increment in policy support for reviving the real economy,” wrote analysts at Nomura.
The rally in Asian shares extended to other markets as well. Japan’s Nikkei rose 1.6% with support from the weakening yen. Meanwhile, MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.0%.
The positive sentiment also spilled over into the futures market. EUROSTOXX 50 futures rose 0.7%, and S&P 500 and Nasdaq futures both edged up 0.1%.
Despite the rally, investors are closely watching U.S. economic data this week, particularly reports on payrolls, core inflation, and consumer spending. Last week, manufacturing surveys signaled a slowdown, raising concerns about the health of the U.S. economy. The outcome of these data releases could impact the Federal Reserve’s decision on interest rates.
The market has priced in an 80% chance of no rate hike at the September meeting, but a 58% probability of a hike by the end of the year.
The flow of U.S. data is also expected to affect global markets. Figures on EU inflation this week could have implications for the European Central Bank’s decision on interest rates next month, while Bank of Japan Governor Kazuo Ueda reiterated the need for loose monetary policy.
In the currency market, the dollar remained firm against the yen, supported by high two-year yields. The dollar stood at 146.40 yen, near its 10-month high. The euro, on the other hand, remained weak against the dollar, which gained broad support from higher Treasury yields.
Oil prices were also influenced by market factors. Brent crude edged up 1 cent to $84.49 per barrel, while U.S. crude rose 6 cents to $79.89 per barrel. Concerns about Chinese demand and high yields continued to weigh on gold, which remained stagnant at $1,915 per ounce.
Investors will be closely monitoring economic releases throughout the week to assess the health of global markets and gauge the potential direction of interest rates.
Reporting by Wayne Cole; Editing by Stephen Coates