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.
FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Shanghai, China September 7, 2018. REUTERS / Aly Song
Sentiment got a boost when China's state planner said Beijing would roll out a planner to increase disposable income, although details were lacking.
A bounce in the 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.
Japanese Nikkei recovered early losses to be 0.09% firmer, while Shanghai blue chips rose 0.7%.
The Chinese and US trade conflict remained a drag after Beijing pledged on Thursday to counteract the latest US $ 300 billion Chinese tariffs.
U.S. President Donald Trump said Thursday that he believed China wanted to conclude an agreement and that the dispute would be quite short, despite it already lasting for more than a year.
Without any settlement in mind, investors have secured a global decline by buying bonds. The return on 30-year debt hit a low of 1.916% at a low of 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 dagrenten.
Such is the darkness that surprisingly strong US retail sales came and went without affecting the bond rally.
Analysts have warned that the current bond market is a different animal than before and may not send a true signal of recession.
"The bond market may have done 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 loosening monetary policy this time."
Futures actually imply that in three chances, the Federal Reserve will cut interest rates by 50 basis points at the September meeting, seeing 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 flagged the need for a substantial easing package in September.
The markets are discounted for a cut in the deposit rate of at least 10 basis points and a resumption of bond purchases, giving German 10-year bond rates at a record low of 0.71%.
"The notion that the package will include a renewed QE program also saw a powerful meeting of Italian, Spanish and Portuguese debt," said Tapas Strickland, CFO of the National Australia Bank.
"If the ECB undertakes such a significant stimulus, it is unlikely to do so alone given the upward pressure it would put on the US dollar."
Mexico overnight became the last country to be surprised by a cut in interest rates, only in five years.
Canada's yield curve reversed by most for nearly two decades, drawing pressure on the Bank of Canada to trade.
All talk of relief in the ECB knocked the euro back to $ 1.1099 and away from a peak of $ 1.1230 early in the week. It helped lift the dollar index up to 98,217 and off the week's bottom of 97.033.
However, the dollar could make a small head start on the safe harbor and idle at 106.20 yen.
The collapse in bond yields continued to make non-interest-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. Brent crude oil futures added 46 cents to $ 58.69, while US crude rose 59 cents to $ 55.06 a barrel.
Editing by Sam Holmes and Jacqueline Wong