By Tom Westbrook
SINGAPORE (Reuters) – China markets surged for a third straight session on Thursday as policy support revived investor confidence, Japanese bonds fell in anticipation of a policy shift and currency markets were steady ahead of a European Central Bank meeting.
The Shanghai Composite rose 3% for its largest daily gain in nearly two years. The blue-chip index rose 2%, as did the Hang Seng which stood some 9.9% above Monday’s 15-month low in late-afternoon trade in Hong Kong.
Property developers, infrastructure firms and state-owned enterprise shares led the way. [.SS]
All three indexes remain down for the year on investors’ frustration at the lack of large-scale response from Beijing to China’s economic slowdown, though Wednesday’s cut to bank reserve requirements has raised expectations for official help.
“Coupled with additional liquidity measures, credit support and impending plans to stabilise financial exposures in real estate, we expect markets to be on board with the ‘stabilisation’ narrative at least through the Lunar New Year,” said BNY Mellon strategist Geoff Yu.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.7%, while markets in Japan and India that have benefited from global investors’ flight from China traded off recent peaks. The Nikkei was flat.
In currency markets, the dollar has bounced from its lows after a survey showed U.S. business activity picking up in January.
The Canadian dollar nursed losses after the Bank of Canada held rates but dropped language saying it was prepared for further hikes.
S&P 500 futures were flat in Asia, as were Nasdaq 100 futures. A 6% drop in Tesla shares after the bell following earnings that missed expectations was offset by sharp gains for IBM after an upbeat revenue forecast.
South Korea beat expectations for growth in the fourth quarter of 2023, though the Kospi slipped and the won was steady. Traders sold shares in chipmaker SK Hynix despite it turning a surprise quarterly profit.
Earnings from luxury behemoth LVMH, Intel and Visa are also due later on Thursday.
YIELDS RISE
Global bond markets have meanwhile been under pressure as traders pare back expectations for rate cuts. European Central Bank policymakers will likely try to pour further cold water on market pricing at the post-meeting press conference.
The ECB is expected to leave rates on hold at Thursday’s meeting. The euro was steady at $1.0878. The yen held on the strong side of 148 per dollar after hints at rate rises in Japan triggered selling in the Japanese government bond market. [JP/]
Ten-year Japanese government bond yields posted their sharpest rise in seven weeks on Wednesday and rose a further 3.5 bps to 0.74% on Thursday. Wednesday’s strong activity data drove two-year U.S Treasury yields from lows overnight and they were steady at 4.37% in Asia.
Interest rate futures price about a 40% chance of a U.S. rate cut in March, down from 75% in December. U.S. GDP data is due later in the session and investors say indicators will need to sour markedly, and soon, to justify wagers on such cuts.
“For you to get rate cuts in March, we need to see bad data next month,” said Remi Olu-Pitan, head of multi-asset growth and income at Schroders at an outlook briefing in Singapore.
“And if that comes through there’s a problem for equities.”
China’s yuan held steady around 7.1590 to the dollar, helped by a strong fixing of its trading band. [CNY/]
In commodity markets Brent futures were 0.4% higher at $80.32 a barrel. Singapore iron ore steadied at $135 a tonne while London copper had shot to a three-week high on hopes of more stimulus measures from China. [MET/L]
($1 = 7.1515 Chinese yuan renminbi)
(Editing by Shri Navaratnam)
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