Asian equities experienced a boost on Thursday, following the rise of U.S. stocks to new highs in anticipation of upcoming inflation data that could influence Federal Reserve policy easing in the months ahead. Notably, Chinese stocks surged after authorities unveiled details of a liquidity tool aimed at assisting institutional investors in purchasing shares, a measure initially announced last month. This positive momentum followed a significant downturn for mainland equities, which recorded their largest loss in four years on Wednesday.
In Asian trading, Treasury yields remained stable, oil prices increased, while the Bloomberg Dollar Spot Index and the yen showed little movement. South Korean bond futures rose after the announcement of their inclusion in the FTSE Russell’s World Government Bond Index. Indian shares also saw a modest uptick, despite Bernstein’s downgrade of its equities rating from neutral to underweight.
Chinese stocks are expected to experience further fluctuations as investors await a press conference by the finance ministry on Saturday, which may provide insights into potential stimulus measures. A 10-day rally in mainland equities ended abruptly on Wednesday, following disappointing economic data from the recent Golden Week holidays and the Chinese government’s hesitance to implement additional measures to sustain the rally.
“Leading into that meeting, there is definitely a lot of optimism and hope regarding fiscal clarity,” said Yuting Shao, macro strategist for State Street Global Markets, during an appearance on Bloomberg Television. She added that the overarching themes of lower U.S. borrowing costs and official support for China’s economy would serve as tailwinds for risk sentiment. “Any clarity from China will add another layer of confidence,” she noted.
According to Morgan Stanley, the expectations are high for China’s Ministry of Finance to convincingly indicate a more robust reflation strategy during the press conference on Saturday.
Louisa Fok, a China equity strategist at Bank of Singapore, suggested that a stimulus package of around two trillion yuan ($283 billion) is becoming widely accepted, with approximately half of it potentially allocated to local governments. If a substantial portion of the remaining funds is directed toward boosting consumption, it would likely benefit the markets, she added.
In other parts of Asia, Taiwan Semiconductor Manufacturing Co. reported a better-than-expected 39% increase in quarterly revenue on Wednesday, though markets in Taiwan were closed on Thursday. In India, shares of the Tata group, spanning from salt to software, garnered attention following the passing of patriarch Ratan Tata at the age of 86 in Mumbai.
Later on Thursday, the release of U.S. consumer price data is anticipated to show further moderation in inflation, bolstering expectations of easing by the Federal Reserve in the near future. Despite this, market projections suggest that the likelihood of another 50 basis point rate cut has diminished following last week’s robust jobs report.
“Policymakers agree that inflation is fading and are recognizing potential weaknesses in job growth,” stated David Russell at TradeStation. “This scenario keeps rate cuts on the table if necessary. Ultimately, it appears that Powell may have the market’s support as the year comes to a close.”
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