The blue-chip CSI300 added another 7.7%, having already climbed 16% last week, the Shanghai Composite jumped 7.1%, on top of last week’s 13% rally, while Nikkei dropped 4.6%
Share markets turned hesitant in Asia on Monday as strife in the Middle East offset more policy measures in China, while the Nikkei dropped on concerns Japan’s new prime minister favoured normalising interest rates.
The stimulus rush in China did help outweigh a poor manufacturing survey and lift the blue-chip CSI300 another 7.7%, having already climbed 16% last week. The Shanghai Composite jumped 7.1%, on top of last week’s 13% rally.
The week is packed with major U.S. economic data including a payrolls report that could decide whether the Fed delivers another outsized rate cut in November.
The Nikkei led the early trends with a drop of 4.6% as investors waited for more direction from new Prime Minister Shigeru Ishiba, who has been critical of the BoJ’s easy policies in the past.
However, he sounded more conciliatory over the weekend saying monetary policy “must remain accommodative” given the state of the economy.
That helped the dollar hold near 142.10 yen, after slipping 1.8% on Friday from a 146.49 top.
Ishiba has endorsed the BoJ’s intention to normalise monetary policy, although leaving it uncertain as to the pace and timing, according to HSBC economist Jun Takazawa.
If additional stimulus measures are realised, this would also likely buttress the recovering trend in spending, thereby firming the BoJ’s conviction to hike interest rates at a gradual pace, he said. All in all, we continue to see a constructive outlook for Japan.
In China, the central bank said it would tell banks to reduce mortgage rates for existing home loans by the end of October, likely by 50 bps on average.
That follows a barrage of monetary, fiscal and liquidity support measures announced last week in Beijing’s biggest stimulus package since the pandemic.
We believe deflation risks are now being taken more seriously, according to Christian Keller, head of economic research at Barclays. At the same time, the Politburo suggests a consensus has likely been reached in Beijing that fiscal stimulus and central government leverage are necessary to arrest the downturn.
This is an important shift in a market that was looking for more than just the bare minimum, Keller said.
