Asian shares rise after China stimulus step

Wednesday, 2 March 2016 00:00 -     - {{hitsCtrl.values.hits}}



Reuters: Asian shares rose on Tuesday, boosted by China’s monetary easing and downbeat manufacturing and service surveys that raised hopes of additional measures, although lacklustre US and European data kept alive concerns about global growth momentum.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose about 0.5%, although Japan’s Nikkei edged down 0.1%, crimped by gains in the yen.

“Yen strength and US market drops put downward pressure on the Tokyo market. It is a good time for bargain hunters who anticipate more easing from China to lift markets later,” said Hiroki Allen, chief representative of Superfund Securities Japan.

The Shanghai Composite Index erased early losses and added 0.2%, and the CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.4%.

An official survey showed activity in China’s manufacturing sector shrank for a seventh straight month in February, more sharply than expected, while the services sector continued to expand although at its slowest pace since late 2008.

The private Caixin/Markit China Manufacturing Purchasing Managers’ Index also fell, falling short of both market expectations and the previous month’s reading.

On Monday, the People’s Bank of China (PBOC) said on its website that it cut its reserve requirement ratio, or the amount of cash that banks must hold as reserves, by 50 basis points.

“We think the PBOC easing is consistent with continued weaker-than-expected economic activity and downside risks to growth,” wrote Jian Chang, an analyst at Barclays. “It should help to support market sentiment in the near term.”

China’s move, combined with a drop in crude output from OPEC and the United States, and a pledge by Saudi Arabia to limit market volatility, lifted crude oil futures overnight and helped them post their first positive month in four.

Crude gave back some of those gains on Tuesday. Brent futures dipped 0.1% to $36.52 a barrel, although U.S. crude futures erased early losses to gain 0.2% to $33.81 after surging 3% overnight.

Wall Street shrugged off Monday’s higher oil prices and finished lower, with MSCI’s global stocks index logging its fourth straight losing month.

Downbeat US data revived concerns about the strength of the economy. Contracts to buy previously owned US homes fell to their lowest level in a year in January, while the Chicago Purchasing Manager’s Index – a leading indicator of the US economy’s health – contracted to 47.6 in February.

The latest figures followed last week’s spate of strong data, including improving consumer spending, that had suggested the US economic recovery was on track and the Federal Reserve could still raise interest rates again this year.

Figures released on Monday showed euro zone annual inflation fell back into negative territory last month, adding to the pressure facing the European Central Bank to further ease monetary policy this month.

All 18 euro money-market traders polled by Reuters expect the ECB to cut its deposit rate again at its 10 March meeting, and they said there was an even chance it would also increase its monthly asset purchases.

Those expectations weighed on the euro, which edged up about 0.1% to $1.0884 but remained not far from a one-month low of $1.0859 struck on Monday.

Against the perceived safe-haven yen, the common currency was down 0.1% at 122.43, not far from a low of 122.085, which was its lowest level since April 2013.

The dollar was buying 112.48 yen, down about 0.2%.

The Australian dollar dipped about 0.1% against its US counterpart to $0.7130, after the Reserve Bank of Australia left its cash rate unchanged at a record low 2.0% as expected.