Asian stocks, along with U.S. equity futures, gained ground amid expectations that China will introduce further stimulus measures to revitalize its economy. The MSCI Asia Pacific Index increased, driven by advances in shares across China, Hong Kong, and South Korea. A briefing by the People’s Bank of China (PBOC) and other regulators is scheduled for Tuesday, following data released on Friday that highlighted a slowdown in economic momentum. Meanwhile, the Japanese yen fell after Bank of Japan Governor Kazuo Ueda signaled that authorities are not in a rush to raise interest rates again.
On Monday, China’s central bank cut a short-term policy rate as part of a series of reductions that began in July, lowering the 14-day reverse repurchase rate from 1.95% to 1.85%. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, expressed confidence that the PBOC will also cut the seven-day repo rate and the reserve requirement ratio in the coming months. “The upcoming press conference will provide insights into the regulators’ policy stance,” he noted.
Global markets are buoyed by the Federal Reserve’s initiation of its rate cut cycle. The U.S. dollar index remained largely unchanged, while Australian bonds declined as the central bank is expected to maintain a policy pause on Tuesday, influenced by persistent housing costs contributing to inflation.
Trading of U.S. Treasuries was inactive in Asia due to a holiday in Japan. This week, numerous Fed officials are set to speak, with key economic data, including the Fed’s preferred inflation measure, likely to influence the ongoing rally in global shares. “Markets will be seeking a balance in the data—continuing disinflation without significant job deterioration,” stated Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd.
In commodities, oil prices rose following a second consecutive weekly gain, with attention focused on the escalating conflict between Israel and Hezbollah. Gold prices steadied near record highs.
In a recent geopolitical development, the U.S. Commerce Department is reportedly preparing to announce proposed regulations to ban Chinese- and Russian-made hardware and software for connected vehicles. Additionally, Sri Lanka’s dollar bonds experienced a decline after leftist candidate Anura Kumara Dissanayake won the presidential election over the weekend.
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