Asian equities saw a boost as investors analyzed China’s strong economic data and the announcement of a new stock buyback program by the country’s central bank. Shares in China and Hong Kong continued to climb after the People’s Bank of China revealed a relending mechanism with an initial 300 billion yuan quota for bank loans used in share buybacks. Additionally, the latest GDP, industrial production, and retail sales figures from China surpassed expectations.
An index of Asian stocks was on its way to its first daily gain since the previous week, driven in part by gains in chipmakers following Taiwan Semiconductor Manufacturing Co.’s impressive earnings report. Taiwanese chipmaker shares surged by as much as 6.3% in early trading, contributing to the overall positive trend in the region. Japanese shares also saw an increase, supported by a weakening yen.
The People’s Bank of China is focused on reducing financing costs for the real economy to stimulate corporate and household borrowing and provide more liquidity support, according to Peiqian Liu, an Asia economist at Fidelity International. Meanwhile, US futures remained steady after the S&P 500 experienced a slight decline from its intraday record the previous day. Treasury markets stabilized after a sell-off, prompted by strong US economic data that led to reduced expectations for rate cuts.
In other news, Japan’s headline inflation met expectations by rising 2.5%, while the yen strengthened slightly after surpassing the 150 per dollar mark, raising concerns about potential official intervention. China’s data release also indicated a slowdown in the decline of home prices, suggesting that government support measures are starting to take effect. Investors also paid attention to the PBOC’s relending mechanism, which offers a 1.75% rate for one-year maturity loans, as stated by the central bank.
With the US economy performing well, swaps traders further lowered their bets on Federal Reserve rate cuts for the remainder of the year. Strong retail sales data in September, exceeding expectations, showcased the resilience of consumer spending, which continues to drive the economy forward. This data, combined with previous positive reports on job growth and consumer inflation, indicated that the US is far from entering a recession.
Commodities markets saw gold reaching a new record high due to ongoing tensions in the Middle East, while West Texas Intermediate crude prices edged up to nearly $71 per barrel. Key events to watch this week include China’s GDP report, US housing starts data, and speeches from Fed officials Christopher Waller and Neel Kashkari.
In summary, Asian equities are on the rise following China’s strong economic data and the announcement of a new stock buyback program. The US economy continues to show strength, leading to reduced expectations for rate cuts. Gold prices are soaring, and oil prices are climbing, reflecting the current market conditions. This article was created with the help of Bloomberg Automation and originally appeared on Bloomberg Businessweek. ©2024 Bloomberg L.P.
