Asia stocks tick higher as China reduces the repo rate

SYDNEY (Reuters) – Asian stocks rose higher Monday after Beijing surprised markets by trimming a key policy rate for the first time since 2015, sparking speculation that more stimulus was on the way for the world's second-largest economy.

FILE PHOTO: Passersby reflected on a listing board outside a brokerage house in Tokyo, Japan, August 6, 2019. REUTERS / Issei Kato

China's central bank cut seven-day reverse repurchase agreements by five basis points to 2.50%, a move which ruled the yuan higher while lowering the Chinese bond yield.

The news helped Shanghai blue chips regain early losses to rise 0.3% .CSI300, although the initial response was generally cautious. MSCI's broadest index of equities in Asia and the Pacific off Japan .MIAPJ0000PUS also rose 0.3% higher.

Japan's Nikkei .N225 added 0.38%, and was just less than the last 13-month peak. E-Mini futures for the S&P 500 ESc1 were anything but flat, and EUROSTOXX 50 futures STXEc1 were too.

Beijing's political moves were hoped that progress in trade talks with the United States could also be more serious.

On Saturday, Chinese state media said the two sides had "constructive talks" about trading in a high-level telephone conversation that included Vice Premier Liu He, US Trade Representative Robert Lighthizer and Finance Secretary Steven Mnuchin.

"Markets are still in danger of further short-term volatility given issues around trade, Iran and the Middle East, impeachment noise and weak global economic data," said Shane Oliver, chief investment strategy and chief economist at AMP Capital.

"But valuations are in order – especially against low bond yields – global growth indicators are expected to improve through next year, and monetary and fiscal policy will be more supportive."


In foreign exchange markets, the dollar was little changed against its main peers on Monday and well within recent tight trading areas. In fact, market volatility has been the lowest in decades and shows no signs of change.

The dollar rose in the security haven to JPY 108.81, after jumping on Friday. Map support is at 108.23 with a stiff resistance of 109.48.

The euro was idle at $ 1.1058 = after finding support at $ 1.0987 last week. Investors are awaiting the first major speech by European Central Bank President Christine Lagarde on Friday for clues about future politics.

Sterling pushed up to $ 1.2923 GBP = D3 as several polls showed the Tories well ahead in the general election.

Against a basket of currencies, the dollar was a shade softer at 97,944 DXY.

The dollar and the bonds are likely to be sensitive to minutes from the Federal Reserve's recent policy meeting, due to be released Wednesday.

"The protocol is likely to repeat that the US economy is & # 39; solid & # 39; and current monetary policy settings are & # 39; appropriate & # 39; which will support the dollar," said Joseph Capurso, a Commonwealth currency analyst. Bank of Australia.

However, he noted the soft report on U.S. Retail sales published on Friday suggested that earlier strong consumption showed some cracks.

“Any further weakness in consumption may provide a basis for a substantial reassessment of the prospects of the FOMC. Initially, FOMC would most likely start cutting interest rates again in 2020, says Capurso.

The spot gold eased to $ 1,465.67 per ounce XAU = when tracking every passing jerk with risk aversion.

Oil prices were supported after Brent touched a seven-week high on Friday. [O/R]

Brent crude LCOc1 futures fired 2 cents to $ 63.32 while U.S. crude CLc1 added 10 cents to $ 57.82 a barrel.

Our Standards: Thomson Reuters Trust Principles.

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