Asia’s major stock indexes began the week on the front foot, rallying after promises of significant stimulus measures by Beijing and a Wall Street-inspired boost following upbeat news on US inflation.
China’s factory activity slowed in June provoking the country’s central bank to pledge more “forceful” action to support the economy, lifting the mood on trading floors in Shanghai and Hong Kong.
Meanwhile, Japan’s Nikkei share average closed at its highest level in 33 years, led by machinery makers, as a quarterly survey by the central bank signalled a recovery in corporate activities.
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The Nikkei index ended 1.70% higher at 33,753.33, its highest close since March 1990. The broader Topix rose 1.41% to 2,320.81.
Wall Street’s three major indexes advanced solidly on Friday, with the tech-heavy Nasdaq boasting its biggest first-half gain in 40 years as inflation showed signs of cooling and that fed into Asia’s markets at the weekly restart.
The Bank of Japan’s (BOJ) quarterly “tankan” survey also showed Japanese business sentiment improved in the second quarter, as companies expected to increase capital expenditure and projected inflation to stay above the Bank of Japan’s 2% target five years ahead.
China stocks rose as well amid hopes of more policy easing after the country’s central bank said it would implement prudent monetary policy in a “precise and forceful manner” to support economic growth and employment.
The Shanghai Composite Index rose 1.31%, or 41.91 points, to 3,243.98, while the Shenzhen Composite Index on China’s second exchange edged up 0.53%, or 10.90 points, to 2,060.13.
Tech giants listed in Hong Kong advanced 3.2% and the Hang Seng Index advanced 2.06%, or 390.16 points, to 19,306.59, while the China Enterprises Index advanced 2.58%.
Investors on the mainland and in the territory will be closely watching the development of China-US relations as US Treasury Secretary Janet Yellen will travel to Beijing on Thursday for meetings with senior Chinese officials on a broad range of issues.
Elsewhere across the region, in earlier trade, Seoul rose while Sydney, Mumbai, Taipei, Manila and Jakarta were also ahead of the curve.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.2%, though it was still lagging far behind Japan’s market.
Yen Remains Under Pressure
The global picture was upbeat too and Eurostoxx 50 futures and FTSE futures both added 0.4%. S&P 500 futures and Nasdaq futures were steady ahead of the July 4 holiday, having gained more than 6% in June.
Sentiment had been soothed on Friday by a modest downward surprise in US inflation while a flat reading for consumer spending suggested the Federal Reserve’s rate hikes were having an impact, albeit gradually.
A data-packed week promises to be pivotal to the outlook for the Chinese economy and US interest rates.
Minutes of the Fed’s last policy meeting are out on Wednesday and will expand on why they decided to pause, though most policy makers also expected to hike at least two more times by year end.
There will also be closely watched surveys on manufacturing and services, job openings and the June payrolls report.
In the forex markets, the prospect of at least one more US rate rise continues to underpin the dollar against the yen, given the Bank of Japan shows little sign of abandoning its super-easy policies.
The dollar stood at 144.48 yen, after hitting an eight-month peak of 145.07 last week before the risk of Japanese intervention slowed its ascent.
The euro was likewise firm at 157.61 yen, and just off its recent 15-year top of 158.01. The single currency was range-bound on the dollar at $1.0915, having spent the entire year so far trading between $1.0635 and $1.1096.
Rising interest rates globally have seen gold struggle recently and the metal was last at $1,920 an ounce, near last week’s three-month low at $1,892.
Oil prices marked time as investors waited to see the impact of another round of output cuts by Saudi Arabia. Brent rose 6 cents to $75.47 a barrel, while U.S. crude firmed 2 cents to $70.66.
Key figures
Tokyo – Nikkei 225 > UP 1.70% at 33,753.33 (close)
Hong Kong – Hang Seng Index > UP 2.06% at 19,306.59 (close)
Shanghai – Composite > UP 1.31% at 3,243.98 (close)
London – FTSE 100 > UP 0.28% at 7,552.78 (1006 GMT)
New York – Dow > UP 0.84% at 34,407.60 (Friday close)
- Reuters with additional editing by Sean O’Meara
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