Asian stocks ended the week at a two-and-a-half year peak as investor mood remained high after China’s leaders rolled out more stimulus measures to lift the world’s No2 economy.
Chinese stocks raced toward their best week since 2008, while a sharp fall in oil prices boded well for disinflation globally.
The People’s Bank of China on Friday lowered banks’ reserve requirement ratio by 50 basis points and cut the 7-day reverse repo rate by 20 bps. It also cut the 14-day reverse repo rate by 20 bps, the second reduction this week.
On Thursday, it was reported China planned to issue special sovereign bonds worth about $284.43 billion this year as part of a fresh stimulus package, as Beijing ramped up its efforts to stabilise its wobbly economy.
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China’s blue chips jumped 3.5%, bringing the weekly rise to 14.6%, the most since November 2008.
The Shanghai Composite Index rose 2.88%, or 86.58 points, to 3,087.53, while the Shenzhen Composite Index on China’s second exchange surged 6.05%, or 99.20 points, to 1,737.56.
Hong Kong’s Hang Seng index also jumped 3.55%, or 707.72 points, to 20,632.30, and was up more than 13.% for the week, its best performance since 2009.
Japan’s Nikkei share average rallied, buoyed by further softening of the yen after a strong advocate of “Abenomics” took the lead in first-round votes in the ruling Liberal Democratic Party’s leadership election.
The Nikkei ended 2.32% higher at 39,829.56, its highest close since July 19, while the broader Topix finished up 0.73% at 2,740.94.
The gains extended after right-wing economic security minister Sanae Takaichi and former defence minister Shigeru Ishiba qualified for the second round of voting to replace Prime Minister Fumio Kishida as the leader of Japan’s ruling party.
The yen fell to its lowest since early this month to 146.495, a plus for exporters who benefit from a softer domestic currency when repatriating funds, as markets braced for a Takaichi victory.
Japanese chip-related stocks led the rally, supported by overnight gains in their US peers, with Tokyo Electron climbing 6.66% to deliver the biggest boost to Nikkei. Lasertec surged 8.19% and was the biggest percentage gainer, while Advantest climbed 4.48%.
Asia Treasury Yields Steady
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.5%, having hit its highest level since February 2022 earlier in the day. It was headed for a weekly gain of 5.3%, thanks to the huge turnaround in Chinese shares.
European sharemarkets were set to open slightly higher, with Eurostoxx 50 futures adding 0.2% and FTSE futures up 0.1%. Wall Street futures were largely flat.
Treasury yields were steady in Asia, having risen overnight on low US weekly jobless claims that led markets to lower the odds of another outsized half point rate cut from the Fed in November to 51%, from 57% a day earlier.
Investors are waiting for the core personal consumption expenditures (PCE) price index – the Fed’s preferred measure of inflation – later in the day. Forecasts are centred around a small monthly rise of 0.2%, as markets are split on the size of the expected rate cut in November.
Two-year Treasury yields were up 6 bps this week to 3.6348%, while 10-year yields rose 7 bps in the week to 3.789%.
Oil was a loser and set for heavy weekly losses on a report that Saudi Arabia was preparing to abandon its unofficial price target of $100 a barrel for crude as it gets ready to increase output.
Brent futures fell 0.4% to $71.31 a barrel and are down 4.2% for the week. That should be good for global disinflation as central banks ramp up rate cuts, and bullish for consumer spending.
Key figures
Tokyo – Nikkei 225 > UP 2.32% at 39,829.56 (close)
Hong Kong – Hang Seng Index > UP 3.55% at 20,632.30 (close)
Shanghai – Composite > UP 2.88% at 3,087.53 (close)
London – FTSE 100 > UP 0.26% at 8,306.45 (0933 BST)
New York – Dow > UP 0.62% at 42,175.11 (Thursday close)
- Reuters with additional editing by Sean O’Meara
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