China’s economic stimulus plan lifts Asian stocks: markets close

(Bloomberg) — Asian shares advanced after China’s central bank announced stimulus measures in an attempt to meet its economic growth target this year and stem a selloff in the stock market.

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Hong Kong shares were the biggest gainers, with key benchmarks rising about 3 percent, while Chinese onshore indexes rose more than 1 percent, as authorities said they were considering setting up a stock stabilization fund. The MSCI Asia Pacific index rose 0.5 percent, with Japanese shares also rising after reopening from the holiday. China’s 10-year government bond yield fell to 2% for the first time on record.

China plans at least 500 billion yuan ($71 billion) of support for stocks and will allow brokerages and funds to use central bank funding to buy stocks after the benchmark CSI 300 index fell to a five-year low at the beginning of this month. . That came as part of a broad package of policy measures to revive the economy, including a cut in a key short-term interest rate and lower borrowing costs for up to $5.3 trillion in mortgages.

While the market’s initial response to the stimulus measures has been positive, analysts see a risk that growth may soon fizzle out as some of the fundamental issues plaguing China’s economy, including deflationary pressure, remain unresolved.

“These measures clearly show that Beijing understands and appreciates the urgency to boost sentiment in the stock market and housing market,” said Siguo Chen, portfolio manager at RBC BlueBay Asset Management. “In the short term it will help the market find a bottom, but in the long term I think we need to see more fiscal support.”

The People’s Bank of China will set up a swap facility to allow securities firms, funds and insurance companies to use liquidity from the central bank to buy stocks, the governor said at a briefing on Tuesday.

“This kind of measure can raise more funds, increase market liquidity and also improve market confidence to a certain extent in the short term, but it cannot change the market trend,” said Zhou Nan, founder and director of investment at Shenzhen Long Hui. Fund Management Co. “There is a high probability that in the short to medium term, the market will have to fall further before it peaks.”

U.S. stock futures fell after the S&P 500 closed 0.3 percent higher in the previous session, just shy of last week’s all-time high.

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Data on Monday showed that US business activity expanded at a slightly slower pace in early September, while expectations deteriorated and a gauge of incoming prices rose to a six-month high, boosting confidence in the world’s largest economy may reach a soft landing. Investors now await data on the Fed’s preferred rate and US personal spending later this week.

The yield on policy-sensitive two-year Treasuries fell a basis point to 3.58 percent in Asian trade, while longer-dated Treasuries were little changed. Traders have bet on nearly three-quarters of a point of easing policy by the end of the year, suggesting at least one more jumbo rate cut is in the offing.

Chicago Fed President Austan Goolsbee said that with inflation approaching the central bank’s target, the focus should turn to the labor market and “that probably means a lot more rate cuts next year.”

Neel Kashkari of the Minneapolis Fed also highlighted a weakness in the labor market, saying he supports cutting interest rates by another half a percentage point by the end of the year. His counterpart at the Atlanta Fed, Raphael Bostic, took a moderate stance. Starting the central bank’s tapering cycle with a big step would help move interest rates closer to neutral levels, but officials should not commit to a cadence of huge moves, according to Bostic.

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In other key developments for Asia, the Reserve Bank of Australia is expected to hold the cash rate at a 12-year high of 4.35% on Tuesday – and keep it there until at least February. The nation’s 10-year yield fell in early trading.

Gold settled near a record high after several Fed officials appeared to leave the door open for further big rate cuts. Oil rose after Israel launched airstrikes on Lebanon that killed nearly 500 people and heightened regional tensions.

Key events this week:

• Australia’s rate decision on Tuesday

• Japan Jibun Bank Manufacturing PMI, Services PMI, Tuesday

• Mexico CPI, Tuesday

• Bank of Canada Governor Tiff Macklem speaks on Tuesday

• CPI Australia, Wednesday

• China’s medium-term lending facility rate on Wednesday

• Sweden’s rate decision on Wednesday

• Switzerland tariff decision on Thursday

• ECB President Christine Lagarde speaks on Thursday

• US Jobless Claims, Durable Goods, GDP Revised Thursday

• Fed Chairman Jerome Powell delivered pre-recorded remarks at the 10th annual US Treasury market conference on Thursday

• Rate decision Mexico, Thursday

• Japan Tokyo CPI, Friday

• Industrial profits in China on Friday

• Eurozone consumer confidence, Friday

• US PCE, University of Michigan, Consumer Sentiment, Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures were down 0.2% as of 11:24 a.m. Tokyo time

• Nasdaq 100 futures fell 0.3%

• Japan’s Topix rose 0.6%

• Australia’s S&P/ASX 200 fell 0.3%

• Hong Kong’s Hang Seng rose 1.7%

• Shanghai Composite rose 0.7%

• Euro Stoxx 50 futures rose 0.1%

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1104

• The Japanese yen was little changed at 143.57 per dollar

• The offshore yuan was little changed at 7.0642 per dollar

Cryptocurrencies

• Bitcoin fell 0.6% to $62,922.38

• Ether was down 1.6% at $2,619.1

BONDS

• The 10-year Treasury yield was little changed at 3.74%

• Japan’s 10-year yield fell one basis point to 0.820%

• Australia’s 10-year yield fell two basis points to 3.94%

commodities

This story was produced with the help of Bloomberg Automation.

–With assistance from Mark Cudmore, Winnie Hsu and Zhu Lin.

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