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Home / Business / Asia stocks take heart in stimulus speculation By Reuters

Asia stocks take heart in stimulus speculation By Reuters




By Wayne Cole

SYDNEY (Reuters) – Asian stocks found some foothold on Friday after a turbulent week as China hinted at more support for its economy amid rising expectations of aggressive stimulus from all major central banks. [19659002] The sentiment lifted when China's state planner said that Beijing would draw up a plan to increase disposable income, though details were lacking.

A bounce in US and European stock futures also helped, with E-Minis for the S&P 500 up 0.55% and EUROSTOXX 50 up 0.5%.

MSCI's broadest index of equities in Asia and the Pacific off Japan declined by 0.2%, although it was still down 1

% for the week.

Japan's recovered losses to 0.09% firmer, while Shanghai chips rose 0.7%.

The Sino-US trade conflict remained a drag after Beijing pledged on Thursday to counteract the latest US $ 300 billion Chinese tariffs.

President Donald Trump said Thursday that he believed China wanted to make a deal and that the dispute would be quite short, despite it already lasting for more than a year.

With no settlement in mind, investors have secured a global downturn by buying bonds. The return on 30-year debt hit an all-time low of 1.166% to be down 27 basis points for the week, the strongest decline since mid-2012.

This meant investors were willing to lend the government money for three decades for less than the daily price.

Such is the darkness that surprisingly strong retail sales in the United States came and went without affecting the bond rally.

Analysts have warned that the current bond market is a different beast than before and may not send a true signal of recession.

"The bond market may have done it wrong this time, but we will not reject the latest recession signals due to distortion," said Simon MacAdam, global economist at Capital Economics.

"Rather, there is some consolation for the world economy that, unlike all previous US yield curve inversions, the Fed has already begun to loosen monetary policy this time."

CAVALRY COMING

Futures actually imply a one-in-three chance the Federal Reserve will cut rates by 50 basis points at the September meeting and see them now only 1% by the end of next year.

There were many other signs that the cavalry was coming.

European Central Banker Olli Rehn on Thursday noted the need for a significant easing package in September.

The markets are key to a cut in deposit rates of at least 10 basis points and a resumption of bond purchases, sending German 10-year bond yields at a record low of 0.71%.

"The notion that the package will include a renewed QE program also saw a sharp rise in Italian, Spanish and Portuguese debt," said Tapas Strickland, CFO of the National Australia Bank.

"If the ECB undertakes such a substantial stimulus, it is unlikely to do so alone given the upward pressure it would put on the US dollar." first in five years.

Canada's yield curve inverted for the most part for nearly two decades, forcing the bank into Canada to trade.

Speaking of ECB relief, the euro hit $ 1.1099 and off a $ 1.1230 peak early in the week. It helped lift up to 98,217 and off the week's bottom of 97,033.

However, the dollar could make little progress at the safe harbor, idling at 106.20 yen.

The collapse in bond yields continued to make non-paying gold look relatively more attractive, and the metal held at $ 1,521.20, just off a six-year peak.

Oil prices tried to bounce after two days of heavy losses. futures added 46 cents to $ 58.69, while rising 59 cents to $ 55.06 per barrel.


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