Most Asian shares hold ground, Japan’s rate fears dent Nikkei By Reuters

By Wayne Cole

SYDNEY (Reuters) – Asian stock markets were mostly firmer on Monday as China announced more stimulus, although it eased on concerns that Japan’s new prime minister favored normalizing interest rates.

Continued Israeli strikes in Lebanon added geopolitical uncertainty to the mix, although oil prices were still weighed down by the risk of oversupply. (OR)

The week is packed with major US economic data, including a payrolls report that could decide whether the Federal Reserve will deliver another huge rate cut in November.

The Nikkei led early action down 4.0 percent as investors eagerly awaited more direction from new Prime Minister Shigeru Ishiba, who has criticized the Bank of Japan’s easy policies in the past.

However, he sounded more dovish over the weekend, saying monetary policy “must remain accommodative” given the state of the economy.

That helped the dollar recover 0.5 percent to 142.85 yen, after falling 1.8 percent from a peak of 146.49 on Friday. (USD/)

“Ishiba supported the BoJ’s intention to normalize monetary policy, although leaving it uncertain about the pace and timing,” HSBC economist Jun Takazawa said.

“If further stimulus measures are implemented, this could also support the recovery in spending, thereby strengthening the BoJ’s conviction to raise interest rates at a gradual pace,” he added. “Overall, we continue to see a constructive outlook for Japan.”

In China, the central bank said it will tell banks to cut mortgage rates on existing home loans by the end of October, likely by 50 basis points on average.

It follows a wave of monetary, fiscal and liquidity support measures announced last week in Beijing’s biggest stimulus package since the pandemic.

“We think deflationary risks are now being taken more seriously,” said Christian Keller, head of economic research at Barclays. “At the same time, the Politburo suggests that a consensus has probably been reached in Beijing that fiscal stimulus and central government leverage are needed to stop the recession.”

“This is an important change in a market that was looking for more than the bare minimum.”

WALL ST ON ROLL

The blue-chip CSI300 and indexes gained about 16% and 13% respectively last week. Hong Kong grew by 13%.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 percent on Monday, after surging 6.1 percent last week to a seven-month high.

Wall Street also had an upbeat week, helped by a benign US core inflation reading on Friday that left the door open to another half-point rate cut by the Fed.

Futures imply about a 53% chance the Fed will cut by 50 basis points on Nov. 7, although the presidential election two days earlier remains a major unknown.

A host of Fed speakers will have their say this week, led by Chairman Jerome Powell later Monday. Data on job openings and private employment are also needed, along with the ISM surveys of manufacturing and services.

rose 0.1 percent on Monday, while Nasdaq futures rose 0.2 percent. It’s up 20% year-to-date and on track for its best January-September performance since 1997.

In the foreign exchange markets, the value remained at 100.41, after last week’s decrease of 0.3%. The euro settled at $1.1169 after rebounding on Friday following a benign US inflation report. (USD/)

The eurozone released its inflation figures this week, along with producer prices and unemployment. German inflation and retail sales are due later in the month as European Central Bank President Christine Lagarde addresses parliament.

A weaker dollar combined with lower bond yields to help gold hit record highs at $2,685 an ounce. It was last at $2,664 an ounce and on track for its best quarter since 2016. (GOL/)

Oil prices were erratic as concerns over a possible increase in supply from Saudi Arabia offset tensions in the Middle East. (OR)

fell 1 cent to $71.86 a barrel, while rose 3 cents to $68.21 a barrel.