Asian markets surged on Monday as China unveiled fresh measures to bolster its struggling economy.
However, investor sentiment remained cautious ahead of key U.S. economic data releases that could impact interest rates.
China’s latest move included a 50% reduction in the stamp duty on stock trading, aimed at rejuvenating the beleaguered stock market and supporting the housing sector. This followed a 6.7% drop in July industrial profits, marking the seventh consecutive monthly decline.
Chinese blue-chip stocks leaped 3.0% amid choppy trading, rebounding from their year-to-date lows.
Analysts at Nomura noted, “We believe these latest measures are in line with the directive from the July Politburo meeting, when the authorities pledged to invigorate China’s capital markets, but do not represent a meaningful increment in policy support for reviving the real economy.”
In response, MSCI’s Asia-Pacific index outside Japan climbed 1.4%, breaking a three-week losing streak. Japan’s Nikkei rose 1.5%, partly due to the yen’s continued weakness.
Market sentiment remained positive despite Federal Reserve Chairman Jerome Powell’s mildly hawkish stance, suggesting possible rate hikes but emphasizing a cautious approach. Goldman Sachs analysts interpreted this as a signal that a September rate hike was unlikely, and the July hike might be the last in the current cycle.
The market now closely watches U.S. economic data, including manufacturing surveys, payroll reports, core inflation, and consumer spending. Payroll forecasts suggest an increase of 170,000 jobs in August with an unchanged 3.5% unemployment rate.
However, concerns linger over potential disruptions from the Hollywood entertainment industry strike.
Also, European Central Bank decisions are tied to EU inflation data this week. The market remains divided on whether the ECB will raise the 3.75% rate, with ECB President Christine Lagarde emphasizing the need for restrictive policies.
While most Western central banks follow suit, Bank of Japan Governor Kazuo Ueda maintains a super-loose policy, keeping the yen under pressure.
On Monday, the dollar traded at 146.50 yen, near its 10-month high, and the euro stood at 158.27 yen.
Asian markets have received a boost from China’s measures, but caution prevails amid uncertainty over U.S. economic indicators and central bank policies worldwide.
