China stocks rise on stimulus light; the dollar falls on installment bets

By Kevin Buckland

TOKYO (Reuters) – Chinese shares rose on Wednesday, lifting regional markets and helping extend a stimulus-fueled global rally that also supported risk-sensitive currencies, while Brent crude settled near a three-week high.

The dollar fell after weak US macroeconomic data overnight boosted arguments for a second interest rate cut at the Federal Reserve’s next meeting. Gold rose to a fresh all-time high.

Blue chips in mainland China advanced 3.1 percent as of 0230 GMT, after rising 4.3 percent in the previous session. Hong Kong’s Hang Seng climbed 2.2 percent, adding to Tuesday’s 4.1 percent gain.

The strong start for Chinese stocks buoyed other regional indices, with Taiwan’s benchmark up 1.3% and South Korea’s Kospi gaining 0.1%

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1 percent.

Japan’s Nikkei shrugged off early weakness to rise 0.3%, helped by a retreat in the yen, a traditional safe haven.

The People’s Bank of China followed up the announcement of broad policy easing on Tuesday with a cut in medium-term lending rates to banks on Wednesday. Beijing’s wide-ranging stimulus – the biggest since the pandemic – also includes steps to boost China’s stock market and support for its struggling real estate sector.

“The focus in Asia remains very much on China,” UBS analysts wrote in a note to clients.

“Debate remains intense as to whether there are stages in this rally, although the desk sees investors choosing to buy/short cover first and ask questions later.”

The yen retreated about 0.17 percent to 143.47 per dollar, reversing earlier gains amid broad dollar weakness.

The euro rose to $1.11915, after earlier pushing as high as $1.1194 for the first time in a month.

The pound climbed as high as $1.3417 and earlier hit a new March 2022 high of $1.3430.

Overnight, data showed US consumer confidence unexpectedly fell to 98.7 this month from an upwardly revised 105.6 in August. The drop was the biggest since August 2021.

Odds for another 50 basis point Federal Reserve rate cut at the November meeting rose to 60.4 percent from 53 percent a day earlier, according to CME Group’s FedWatch tool.

Meanwhile, the Australian dollar initially rose to its highest since last February at $0.6908, but then eased back to $0.68915 after monthly inflation figures showed some cooling, potentially setting up an earlier cut of the rate of interest by the Reserve Bank.

“The decline in underlying measures of inflation is an unexpected and welcome surprise,” said Tony Sycamore, an analyst at IG.

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Provided the cooling is replicated in quarterly price data next month, “a dovish pivot from the RBA is being set up”, leading to a quarter-point rate cut in December, Sycamore added.

Gold rose 0.2% to $2,662.50 an ounce, having previously hit a new record high of $2,665.10.

Brent crude futures fell 19 cents to $74.98 a barrel, but remained close to Tuesday’s high of $75.87, a level not previously seen since September 3.

U.S. West Texas Intermediate crude lost 22 cents to $71.34 a barrel.

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)