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Asian markets witnessed a remarkable recovery from 11-month lows, driven by a combination of positive factors. Investors celebrated China’s announcement of a trillion-yuan sovereign bond issue, which is perceived as a promising precursor to significant economic stimulus. Additionally, the Australian dollar surged following an inflation report that exceeded expectations.
The MSCI’s broadest index of Asia-Pacific shares outside Japan, which recently touched its lowest level since last November, rebounded by 0.6%. Meanwhile, the Hang Seng Index gained more than 1%, and Japan’s Nikkei climbed by 1.2%.
In the United States, Treasuries maintained their upward momentum after the 10-year yield briefly surpassed the 5% mark on Monday. The benchmark yield held firm at 4.82%.
On the corporate front, Google’s parent company, Alphabet, experienced a 6% decline in after-hours trading. Investors expressed disappointment with the performance of its cloud business. In contrast, Microsoft shares saw a nearly 4% increase, causing Nasdaq 100 futures to drop by 0.4% during Asian trading.
In Europe, stock futures remained relatively stable, while oil and the euro faced downward pressure due to weaker-than-expected purchasing managers surveys on the continent. Later in the session, Eurozone lending data and a German business survey are expected to shed further light on the economic situation.
China’s blue-chip CSI300 index, which had been hovering near four-year lows, managed to gain 0.5%. This positive momentum followed the approval by China’s top parliament of a 1 trillion yuan ($137 billion) sovereign bond issuance. These funds are earmarked for disaster recovery efforts and infrastructure improvement.
Contributing to the overall positive sentiment was an announcement by state-owned investment company Central Huijin that it would purchase exchange-traded funds (ETFs). Historically, such actions have triggered substantial market rallies.
Steven Leung, Executive Director of Institutional Sales at broker UOB Kay Hian in Hong Kong, expressed optimism: “Government expenditure will help the economy to stabilize further and strengthen growth in the fourth quarter.” Central Huijin’s commitment to ETF purchases has previously led to rallies of more than 20% in 2013 and 2015, a sentiment boost that’s welcomed by investors. Furthermore, Hong Kong’s leader, John Lee, confirmed reductions in stock-trading duties and certain property stamp duties in his annual policy statement.
Anticipated Rate Hike in Australia:
In the currency markets, the euro faced losses and dropped to $1.0601 as the euro zone composite PMI fell further into contractionary territory. Meanwhile, the yen remained stable at 149.84, possibly due to selling pressure causing Japanese yields to rise slightly. Japanese government bond yields reached a ten-year high of 0.865%.
The standout performer was the Australian dollar, surging by over 0.5% to touch a two-week high of $0.64. While the annual pace of inflation in Australia slowed in the third quarter, the Reserve Bank of Australia’s (RBA) preferred core measure exceeded forecasts, rising to 1.2% from the expected 1.1%. Analysts at CBA believe this increase in underlying inflation in Q3 2023 is strong enough to prompt the RBA to act on their hiking bias at the upcoming Board meeting. RBA Governor Michele Bullock is scheduled to appear before a parliamentary committee on Thursday.
Global Economic Indicators:
Brent crude futures held steady at $87.92 per barrel, with Europe’s economic challenges contributing to a slowdown in gains previously made amid conflicts in the Middle East.
The United States, along with other nations, has been advocating for a ceasefire in the fighting between Israel and Hamas to allow essential aid into the besieged Gaza Strip.
In the precious metals market, spot gold, after briefly reaching $1,997 an ounce last week, traded at $1,971. Notably, Bitcoin has shown signs of revival from a prolonged period of stagnation referred to as the “winter,” which followed various controversies, including the collapse of the exchange FTX. Bitcoin’s recent 15% surge is attributed mainly to speculation surrounding the success of exchange-traded fund (ETF) applications from firms like BlackRock, which are expected to attract capital into the cryptocurrency market. As of the latest data, Bitcoin was trading at $34,158.
The U.S. Securities and Exchange Commission has not provided official comments on this speculation.
