Asia shares at 7-month peak as China talks stimulus

Tuesday, 9 April 2019 00:11 -     - {{hitsCtrl.values.hits}}

An investor sits in front of a board showing stock information at a brokerage office in Beijing, China, December 7, 2018 - REUTERS


SYDNEY (Reuters): Asian shares inched up to seven-month highs yesterday as investors cheered a rebound in US payrolls and hints of more stimulus in China, though there was some caution ahead of what is likely to be a tough US earnings season.

In a document published on the central government’s website late on Sunday, Beijing said it would step up a policy of targeted cuts to banks’ required reserve ratios to encourage financing for small and medium-sized businesses.

Chinese blue chips climbed 1.4% to territory not visited since March last year. MSCI’s broadest index of Asia-Pacific shares outside Japan followed by gaining 0.4% to its highest since August.

Japan’s Nikkei also made its high of the year so far and was last up 0.1%. E-Mini futures for the S&P 500 were little moved.

On Wall Street, the benchmark S&P 500 closed higher for its seventh trading day in a row last week, the longest winning streak since October 2017. 

However, a test looms as major US banks kick off what analysts expect to be the first quarter of contracting corporate earnings since 2016.

JPMorgan Chase & Co and Wells Fargo & Co will get the ball rolling on Friday.

Minutes of the Federal Reserve’s last policy meeting are due out tomorrow.

“Markets will be looking at just how dovish the FOMC has become,” wrote analysts at TD Securities in a note. “We put a very low but not zero chance on a rate cut discussion; conversely rate hikes are still on the horizon for the majority of Fed officials.”

“The minutes are likely to show peak dovishness in terms of nervousness about the outlook.”

Jobs relief

There was a huge sigh of relief globally on Friday when the US payrolls report showed a solid 196,000 rise in jobs in March, while annual wage growth slowed a little to 3.2%.

“This data assuages both the downside and upside fears,” said Deutsche Bank G10 FX Strategy Global Head Alan Ruskin. “Fears of soft growth are assuaged. On the upside, the wage data does not point to further acceleration that would threaten inflation.”

“It plays to idea that the US economy remains reasonably robust, and does not justify any rate cut expectations over say the next six months, and is to that extent going to play to buying US dollar dips versus the majors.”

The dollar was flat at 97.329 against a basket of currencies yesterday, but remained short of the March peak at 97.710 which marks major chart resistance.

The dollar held its recent gain on the Japanese yen at 111.52, but again needs to clear the March top of 112.12 to spark a true uptrend.

The euro has been undermined by a string of dismal data out of Europe and idled at $ 1.1218 not far from its recent 20-month trough at $ 1.1174.

Sterling had troubles of its own at $ 1.3046 as time ticks away to Britain’s departure from the EU on 12 April, with no deal agreed.

Prime Minister Theresa May must come up with a new plan to secure a delay from EU leaders at a summit tomorrow.