Wednesday, February 28, 2024
HomeEconomyChinese stocks surge on rescue efforts; dollar, yields steady

Chinese stocks surge on rescue efforts; dollar, yields steady

 
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By Rae Wee

SINGAPORE (Reuters) -Asian shares rode a sharp rise in Chinese stocks higher on Tuesday as Beijing ramped up efforts to put a floor under its slumping market, but elsewhere investors were cautious as bets trimmed for a near-term Federal Reserve rate cut.

A slew of announcements from China’s securities regulator, as well as a reported meeting between President Xi Jinping and financial regulators on Tuesday, highlighted the urgency of Chinese authorities to stem heavy losses in its stock market, which have plumbed multi-year lows in recent days.

China state fund Central Huijin Investment also said the same day that it has expanded its scope of investment in exchange-trade funds (ETFs), according to a statement on its website.

The moves come as China’s blue-chip index plunged to a five-year low last week on the back of the country’s ailing economy, which had prompted state-backed investors, dubbed the “national team”, to step up their buying of blue-chip stock tracking index funds to support the market. [.SS]

The CSI300 jumped more than 3% in the wake of Tuesday’s developments, while the Shanghai Composite Index, which bottomed at a five-year trough on Monday, likewise surged more than 3%.

Both were on track for their biggest one-day percentage gain since 2022.

“It looks like they’re really pulling out all the stops to try and turnaround the stock market rout,” said Khoon Goh, head of Asia research at ANZ.

“The news flash about President Xi talking with financial regulators about the stock, I think is also another signal that the President himself is taking this matter seriously.”

Hong Kong markets likewise charged higher, with the Hang Seng Index up 3.78%. The Hang Seng Tech index surged 6.5%.

The gains hoisted MSCI’s broadest index of Asia-Pacific shares outside Japan up 1.2%. Japan’s Nikkei fell 0.5%.

Stocks in Europe looked set to extend the positive lead in Asia, with EUROSTOXX 50 futures up 0.45%.

Nasdaq futures edged 0.19% higher, while S&P 500 futures tacked on 0.05%.

In currencies, the Australian dollar jumped after the country’s central bank retained a tightening bias at the conclusion of its policy meeting and warned against imminent rate cuts, joining the Fed chorus of caution.

The dollar hovered near a three-month high against its major peers and last bought 148.39 yen, buoyed by the prospect of higher-for-longer U.S. rates. [FRX/]

Data on Monday showed the U.S. services sector growth picked up in January as new orders increased and employment rebounded, adding to growing doubts about the slew of Fed rate cuts priced in for this year, which had already been dialled back in the wake of Friday’s blockbuster U.S. jobs report.

HAWKISH TONE

Down Under, the Reserve Bank of Australia (RBA) on Tuesday held interest rates steady as expected, but cautioned that a further increase could not be ruled out.

That sent the Aussie up roughly 0.4% to $0.6508, as futures pushed out the likely timing of a first easing to later in the year.

“Whilst few suspect another hike could follow, it has helped lift (the Aussie) from arguably oversold levels following strong economic data from the U.S.,” said Matt Simpson, senior market analyst at City Index.

“Like Fed watchers, traders are now obsessing over when the RBA’s first cut will arrive, over if they will hike again this cycle.”

Fed expectations remained the main driver of market moves as investors come to terms with the likelihood of U.S. rates staying higher for longer than initially expected.

That kept U.S. Treasury yields elevated, with the two-year yield, which typically reflects near-term interest rate expectations, hovering near Monday’s one-month high. It was last at 4.4306%. [US/]

Market pricing shows roughly 115 basis points of easing by the Fed this year, down from over 150 bps at the end of last year.

Bets for a March rate cut have also largely been priced out, and investors have lengthened the odds for one in May.

“What does worry us… is whether the ongoing strength of the U.S. job market in January means that the U.S. consumer will stay strong, thereby undoing the disinflationary trend, and extending tight monetary policy more indefinitely,” said Thierry Wizman, global FX and rates strategist at Macquarie.

In commodities, oil prices held largely steady as traders took stock of a visit to the Middle East by U.S. Secretary of State Antony Blinken to discuss a ceasefire offer in the region.

U.S. crude rose seven cents to $72.85 a barrel. Brent futures gained eight cents to $78.07 [O/R]

Gold rose 0.12% to $2,027.09 an ounce. [GOL/]

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