A man walks past an electric monitor showing the Nikkei stock average and the Japanese yen exchange rate outside a brokerage house on May 2, 2023 in Tokyo, Japan. REUTERS/Issei Kato Obtain licensing rights
Sydney, Aug. 28 (Reuters) – Asian stocks rallied on Monday as China announced fresh measures to support its faltering markets, while mood remained cautious on whether to raise interest rates again ahead of readings on U.S. jobs and inflation.
Beijing announced on Sunday that it would halve a stamp duty on stock trading in the latest attempt to boost the struggling market and followed up with measures to support housing. China’s securities regulator has also approved the launch of 37 retail funds.
Profits at China’s industrial firms fell 6.7% in July, extending the decline to a seventh straight month this year.
Investors welcomed any help they could get and Chinese blue chips (.CSI300) rose 1.5% in bitter trade, off their lowest level in the year so far.
Eyes are on the official PMI for August due out on Thursday, which is expected to run further in the red.
“We believe these latest measures are in line with the order of the July Politburo meeting, where officials pledged to stimulate China’s capital markets, but do not represent a meaningful increase in policy support to revive the real economy,” analysts at Nomura wrote. A hint.
MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) rose 1.0%, paring small gains last week and paring three weeks of losses.
Japan’s Nikkei (.N225) rose 1.6%, led in part by sustained yen weakness.
An improvement in risk sentiment led EUROSTOXX 50 futures to add 0.7%, while FTSE futures closed for the holiday. S&P 500 futures and Nasdaq futures both rose 0.1%, extending last week’s modest gains.
The market overcame a somewhat dovish outlook from Federal Reserve Chairman Jerome Powell, who reiterated his desire to raise rates again but promised to move “carefully.”
“We take this to mean that the FOMC is unlikely to make a hike at the September meeting,” analysts at Goldman Sachs wrote.
“We continue to expect that the FOMC will ultimately decide that additional policy tightening is unnecessary, and the July FOMC meeting will be the last of the hike cycle.”
Futures indicate an 80% chance of a steady outcome at the September 20 meeting, but a 58% chance of a year-end hike.
Negative risk in jobs
A batch of manufacturing surveys last week depended on the flow of U.S. data, which ran hot until it pointed to a slowdown both at home and abroad.
That lifted the stakes for manufacturing in this week’s ISM survey, along with reports on wages, core inflation and consumer spending.
Average forecasts for payrolls rose by 170,000 in August with the unemployment rate steady at 3.5%.
Analysts at JPMorgan warned that job gains could be dampened by an entertainment industry strike in Hollywood, and pointed to an increase of just 125,000.
EU inflation figures this week could be instrumental in whether the European Central Bank decides to hike next month.
The market is evenly divided on whether there will be another rate hike to 3.75%, with ECB President Christine Lagarde insisting on Friday that policy should be restrained.
It was a common theme among western central banks, with Bank of England Deputy Governor Ben Broadbent saying over the weekend that rates should remain high “for some time to come”.
A different figure, Bank of Japan Governor Kazuo Uida, reiterated on Friday the need for policy to be more loose.
That divergence kept the yen under pressure and the dollar was firm at 146.40 early on Monday, after hitting a 10-month high near 146.64 on Friday. The euro hit its highest level since October last year at 158.20 yen.
The single currency had less luck against the dollar, which received broad support from higher Treasury yields, and fell for six consecutive weeks to $1.0808.
The yield on US two-year notes rose to 5.104%, the highest on Friday in early July.
Higher yields and a stronger dollar are an upside for gold, which slumped to $1,915 an ounce.
Oil prices received some support from US diesel prices, although concerns about Chinese demand remained a drag.
Brent was up 1 percent at $84.49 a barrel, while U.S. crude was up 6 cents at $79.89 a barrel.
Reporting by Wayne Cole; Editing by Stephen Coates
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