SYDNEY, Sept 30 (Askume) – Asian shares were volatile on Monday as tensions in the Middle East weighed on the impact of more stimulus measures from China, while Japan’s new prime minister is expected to support normalising interest rates, with the Nikkei sliding on concerns.
The boost in stimulus helped offset the negative impact of manufacturing surveys and lifted the blue-chip CSI300 index (.CSI300) to a 3.0% gain, following a 16% gain last week. The Shanghai Composite Index (.SSEC) rose 4.4%, following the previous week’s 13% gain.
While oil prices remain in check due to supply oversupply risks, continued Israeli attacks on Lebanon have added to geopolitical uncertainty.
This week is full of key US economic data, including a wages report that could determine whether the Federal Reserve will cut interest rates sharply again in November.
The Nikkei share average (.N225) fell 4.1% in early trade as investors awaited more directives from new Prime Minister Shigeru Ishiba, who has criticised the Bank of Japan’s easy policies in the past.
However, he took a more accommodative stance over the weekend, saying monetary policy “should remain accommodative” given the state of the economy.
This left USD/JPY up 0.2% to 142.52 yen, down 1.8% from Friday’s high of 146.49.
“Ishiba supports the Bank of Japan’s intention to normalize monetary policy, although uncertainty remains about its pace and timing,” said HSBC economist Jun Takazawa.
“If more stimulus measures are implemented, this will also strengthen the trend of improving spending, which will increase the Bank of Japan’s confidence in gradually raising interest rates,” he said. “Overall, we see a constructive outlook for Japan.”
In China, the central bank said it would require banks to reduce mortgage rates on existing home loans by an average of 50 basis points by the end of October.
This comes after Beijing last week announced a series of monetary, fiscal and liquidity support measures in its biggest stimulus package since the pandemic began.
“We believe the risk of deflation is now being taken more seriously,” said Christian Keller, head of economic research at Barclays. “Meanwhile, the politburo said there is a consensus in Beijing that central government fiscal stimulus and leverage are necessary to prevent a recession.”
“This is a significant shift in a market that expects more than the minimum.”
Wall Street outperforms
Gains in China lifted MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) by 0.3%, after rising 6.1% last week to a seven-month high.
Good US core inflation data on Friday also boosted Wall Street, paving the way for the Federal Reserve to cut interest rates by half a percentage point.
The futures market estimates that the probability of the Federal Reserve cutting interest rates by 50 basis points on November 7 is about 53%, although the presidential election in the first two days is still a major uncertainty.
This week, several Fed speakers will deliver speeches, led by Chairman Powell. In addition, ISM survey data on job opportunities and private hiring, as well as manufacturing and services, will also be released on Monday.
Eurostoxx 50 futures FTSE futures were little changed in early trade. S&P 500 futures were steady on Monday, while Nasdaq futures fell. The S&P 500 (.SPX) is up 20% so far this year and on track for its strongest January-to-September performance since 1997.
In the currency market, the U.S. dollar index was steady at 100.41 after falling 0.3% last week. The euro rose to $1.1167 on Friday after the release of the U.S. inflation report.
The euro zone is also due to release inflation data this week, as well as producer prices and unemployment data. German inflation and retail sales data will be released later on Monday, and European Central Bank President Christine Lagarde will address parliament.
Gold prices hit an all-time high of $2,685 an ounce as the dollar weakened and bond yields fell. Prices were last at $2,656 an ounce and are expected to register their best quarterly performance since 2016.
Oil prices have risen as tensions in the Middle East have eased concerns that Saudi Arabia might increase supply.
Brent crude rose 61 cents to $72.59 a barrel, while US crude rose 44 cents to $68.60 a barrel.
