Asian stock markets showed gains following a wave of encouraging news from China, boosting investor sentiment. The U.S. dollar remained stable as attention turned to a closely contested election in the United States.
Chinese equity indices surged approximately 2%, leading the regional advance. Japan’s Nikkei 225 rebounded sharply after a public holiday, while Australian and South Korean stocks experienced slight declines. The Bloomberg Dollar Spot Index held steady, and the yield on 10-year Treasury bonds increased by one basis point.
After a slow start, Asian markets gained momentum as data revealed that China’s service sector expanded at its fastest rate since July, accompanied by remarks from Premier Li Qiang suggesting the government has ample policy flexibility. Additionally, positive sentiment was bolstered by the review of a proposal by China’s top legislative body aimed at alleviating the financial pressure on local officials.
Investors are increasingly focused on the upcoming U.S. presidential election, with polls indicating a tight race between Donald Trump and Kamala Harris. A contested outcome could prolong the counting process, potentially leading to increased market volatility.
James Sullivan, head of APAC equity research at JPMorgan Securities Singapore, noted on Bloomberg TV, “It would absolutely make a lot of sense for the Chinese government to be keeping some of their stimulus powder dry in expectation and trying to understand what is going to happen out of the United States. A Trump victory is more in the price than a Harris victory.”
This week holds additional market-moving catalysts, including the U.S. election, the Federal Reserve’s interest rate decision, and subsequent remarks from Chairman Jerome Powell, who will outline the central bank’s monetary policy trajectory. A significant number of U.S. companies are also scheduled to release their earnings reports.
Chris Weston, head of research at Pepperstone Group, stated on Bloomberg TV that the U.S. dollar could be the most direct market indicator this week. “A Harris victory coupled with a split Congress warrants selling of the U.S. currency, while a Trump win could lead to a brief surge in the dollar, possibly around 1% or 2% over a day or two,” he explained.
In Australia, the central bank decided to keep its key interest rate at 4.35% as anticipated, resulting in minimal market reaction. The board highlighted the “high level of uncertainty” regarding the global economic outlook.
Meanwhile, in Japan, Yuichiro Tamaki, a potential ally for the weakened government, advised against further interest rate hikes until at least March, urging a careful assessment of next year’s wage negotiations before making policy changes. The yen weakened against the dollar, and Japanese stocks were granted an additional 30 minutes of trading.
In the commodities market, gold prices declined as investors braced for the uncertain U.S. election results. Oil prices stabilized after experiencing a nearly 3% surge on Monday, fueled by rising tensions in the Middle East and OPEC+’s decision to extend supply restrictions.
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