Asian markets continued to build on their gains, driven by increased risk appetite following China’s recent stimulus initiatives and favorable economic signals from the United States. China’s CSI 300 Index is poised for its most substantial weekly increase since 2008, bolstered by government commitments to enhance fiscal support and stabilize the property sector to stimulate growth. Additionally, Hong Kong’s technology index reached its highest level in over a year, reflecting investor optimism.
This week’s market dynamics have been significantly influenced by stimulus measures in the world’s two largest economies. On Friday, China reduced the reserve requirements for banks ahead of a weeklong holiday, further fueling bullish sentiment. Investors are also awaiting key US economic indicators, including the Federal Reserve’s preferred inflation measure and consumer demand data, which will be released later today, offering crucial insights into the future direction of US interest rates.
Elias Haddad, a strategist at Brown Brothers Harriman, commented on the situation, stating, “The combination of increased stimulus from China and the market’s anticipation of a more aggressive easing cycle from the Fed, coupled with a strong US economy, creates a favorable environment for risk assets. This encouraging backdrop is exerting downward pressure on the dollar, particularly against growth-sensitive currencies.”
In Japan, the yen weakened as bets increased that Sanae Takaichi, known for opposing interest rate hikes, will become the next leader. Concurrently, Japanese bond futures rose. Consumer inflation in Tokyo also eased this month, following outgoing Prime Minister Fumio Kishida’s reinstatement of energy subsidies to help households manage one of the hottest summers on record.
On Tuesday, the People’s Bank of China launched one of its most aggressive policy campaigns in decades, unveiling a substantial stimulus package aimed at bolstering the sluggish economy and restoring investor confidence. Senior analysts at ING Groep NV, including Robert Carnell, noted that the decision to hold the politburo meeting in September—rather than waiting for the usual December schedule—signals the authorities’ willingness to take urgent action to meet the 5% growth target. “This week’s aggressive policy package from the PBOC was unexpected, and we can anticipate additional measures soon,” they wrote.
In Hong Kong, shares of New World Development surged by as much as 24% on Friday, marking their most significant one-day gain since 1998, as trading resumed following a suspension linked to the resignation of the company’s chief executive officer.
Meanwhile, revised data from the United States indicated a stronger-than-expected economic performance, primarily driven by robust consumer spending. A drop in jobless claims further underscored the resilience of the labor market. However, investors seeking insights into the economic outlook and monetary policy from Fed Chair Jerome Powell on Thursday were left wanting, as no details were provided.
As the S&P 500 reached its 42nd closing record of the year, futures for US indexes softened early on Friday. The dollar ticked up slightly, while 10-year US Treasury yields remained stable.
US stock markets were buoyed on Thursday by a positive forecast from Micron Technology Inc., which attributed its growth to rising AI demand. In contrast, shares of Super Micro Computer Inc. fell following news of an investigation by the US Justice Department, despite the company also benefiting from the AI boom.
In the commodities sector, oil prices continued to decline as Saudi Arabia committed to increasing production in December. Meanwhile, Libya appointed a new central bank governor, paving the way for a revival of crude output. Copper prices rose back above $10,000 per ton, iron ore exceeded $100, and gold reached another record high on Thursday.
In a separate development, Sri Lanka’s central bank opted to maintain its benchmark interest rates unchanged during its first meeting since the election of a new president, as uncertainty surrounding the International Monetary Fund loan program lingers.
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