Asia Stocks Reach 2.5-Year High Amid China’s Stimulus Measures – Reuters

By Ankur Banerjee

SINGAPORE – Asian stocks climbed on Tuesday to their highest level in over two and a half years, driven by a series of stimulus measures announced by China, while expectations for additional rate cuts in the U.S. contributed to positive investor sentiment, putting pressure on the dollar.

In a highly anticipated press conference, China’s leading financial regulators introduced several measures, including a 50 basis point cut in bank reserves and a reduction in mortgage rates, aimed at stimulating sluggish economic growth.

These announcements propelled Chinese stocks upward, with the blue-chip CSI300 Index opening 1% higher, while the broader market also gained 1% at the start of trading. In Hong Kong, stocks surged over 2% in early trade, with mainland property stocks rising 5%.

As a result, MSCI’s broadest index of Asia-Pacific shares excluding Japan increased by 0.41% to 588.43, reaching levels not seen since April 2022.

“While there was some anticipation that stimulus measures would be announced, the actual package seems to be larger than what the market expected,” stated Khoon Goh, head of Asia research at ANZ. “Overall, this could help support the economy, but it remains to be seen whether it will sufficiently address the underlying issues, particularly the lack of confidence in the economy.”

Investor attention will also be directed toward the Reserve Bank of Australia’s upcoming policy decision, which is expected to keep rates steady. However, last week’s 50 basis point cut by the Federal Reserve has fueled speculation that Australia may follow suit.

“The RBA is likely to maintain its hawkish stance for now, aiming to keep inflation expectations in check,” commented Charu Chanana, head of currency strategy at Saxo. “A potential pivot may only occur at the November 5 meeting, depending on labor market data and the third-quarter CPI report.”

The Australian dollar was the biggest mover in early trading, rising 1.4% to a near three-week high ahead of a much-anticipated speech by Bank of Japan Governor Kazuo Ueda.

Meanwhile, U.S. stocks closed modestly higher overnight as traders continued to analyze the Federal Reserve’s significant policy shift, with policymakers elucidating the necessity of the 50 basis point cut.

Market expectations are currently split regarding whether the U.S. central bank will implement another 50 basis point cut or a 25 basis point cut in November, with traders pricing in 76 basis points of easing this year.

Senior Markets Strategist Elias Haddad from Brown Brothers Harriman expressed that the market might be overestimating the Fed’s capability to ease rates. “It will likely take strong U.S. jobs data to trigger a significant change in Fed funds rate expectations,” he noted.

The next non-farm payrolls report is scheduled for October 4, and until then, a dovish Fed and a strong U.S. economy are expected to support positive market sentiment, undermining the dollar against growth-sensitive currencies.

The U.S. dollar index stood at 100.95, close to the one-year low of 100.21 reached last week. The yen remained stable at 143.65 per dollar, while the euro held steady at $1.11055, having declined by about 0.5% on Monday due to disappointing business activity reports in the euro zone, which raised expectations for further interest rate cuts by the European Central Bank this year.

The Australian dollar was down 0.15% at $0.6828, yet remained near the nine-month high it had reached on Monday.

In commodities, oil prices saw a slight increase in early trading, with futures up 0.26% at $74.09 a barrel, while other oil futures climbed 0.3% to $70.6. Oil prices had dropped on Monday due to concerns about demand and weak economic data from Europe.