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Asia stocks make cautious gains as weak data boosts stimulus hopes

September 09
11:27 2019

Asian stocks eked out modest gains on Monday, amid a cautious market mood as investors pinned expectations on likely stimulus to support growth in the world’s major economies, which showed further signs of struggle.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1%.

Australian stocks edged up 0.1%, South Korea’s KOSPI rose 0.8% and Japan’s Nikkei was up 0.5%.

The Dow rose 0.25% and the S&P edged up 0.1% on Friday.

Global equity markets received a lift after China’s central bank said on Friday it was cutting the amount of cash that banks must hold as reserves, releasing liquidity to shore up a slowing economy dogged by the Sino-U.S. trade conflict.

Risk sentiment was also fortified as Fed Chairman Jerome Powell said Friday that the central bank will continue to act “as appropriate” to sustain the economic expansion in the world’s biggest economy.

Broader stock market gains were tempered in the wake of lackluster economic data – U.S. job growth slowed more than expected in August – although even this was seen as a positive factor for equities.

“Equities usually respond negatively to soft data. But the fact that the U.S. jobs report shows the market is banking on stimulus, expecting the Fed to respond to economic weakness with rate cuts,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

Buoying market confidence on Monday were expectations the European Central Bank would cut interest rates on Thursday in one of the week’s key events.

“The equity markets will receive a further lift and consolidate their recent gains if they can confirm the ECB’s dovish stance,” Ichikawa at Sumitomo Mitsui DS Asset Management said.

The dollar was capped as U.S. yields came off two-week highs after Friday’s soft U.S. jobs report heightened expectations for a Fed rate cut.

The greenback traded at 106.975 yen JPY=, off the one-month peak of 107.235 scaled late last week.

The euro was steady at $ 1.1022, weighed down ahead of Thursday’s ECB policy decision and in distance of a 28-month low of $ 1.0926 set last week.

The Australian dollar, sensitive to shifts in broader risk appetite, hovered near a five-week peak of $ 0.6862 set on Friday.

The 10-year U.S. Treasury yield was at 1.5585% after bouncing to 1.6080 on Friday, its highest since Aug. 23.

Brent crude oil futures LCOc1 gained 0.5% to $ 61.85 per barrel. The contract had risen 1% on Friday after the Fed said it would act to sustain U.S. economic growth and was on track to gain for the fourth day.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.

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