By Ankur Banerjee
SINGAPORE (Reuters) – Asian shares got a boost from Chinese shares on Thursday as China’s central bank launched its 500 billion yuan facility to boost capital markets, while the dollar remained stuck at a two-month high ahead of U.S. inflation data later in the day .
The People’s Bank of China (PBOC) said it would start accepting applications from financial institutions to participate in a newly created financing program, a plan it announced on September 24 as part of a series of stimulus measures that pushed Chinese stocks higher.
China’s CSI300 index rose 1.7% in early trading, a day after a 7% decline, as investors continued to focus on the details of Chinese authorities’ stimulus measures to revive the flagging economy.
Hong Kong’s Hang Seng rose 2.5% after falling 1.3% on Wednesday and is up 24% this year.
This left MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.76% in early Asian hours. Japan’s Nikkei rose 0.5%.
The market’s attention is now focused on a Treasury press conference on Saturday, where details of the fiscal stimulus plan will be given.
“It is likely that if and when we get more details on the scale of spending, other policymakers will be better able to roll out supportive policies relevant to their functions,” ING economists said in a note on Thursday.
“While this may take more time compared to monetary policy, we continue to expect fiscal stimulus in the coming weeks and months.”
Chinese shares rose to their highest level in two years on Tuesday after the long national holiday, but quickly lost momentum as the lack of details on China’s stimulus measures dealt a blow to market enthusiasm.
Benchmark indexes in China posted their biggest daily losses since the start of the COVID-19 pandemic on Wednesday.
“The ultimate goal of the Chinese market is not to create sudden rallies. It is about wanting to increase confidence in the domestic economy, to relieve pressure on the real estate market. Their end goal is domestic stability,” said Henry Wu, head of the Chinese market. from XTrackers Products USA.
American CPI looms
Overnight, the S&P 500 and the Dow Jones closed at record highs following the release of the Federal Reserve meeting minutes and ahead of September inflation data. [.N]
The minutes showed that a “substantial majority” of Fed officials at the September meeting favored beginning an era of simpler monetary policy with an outsized half-point rate cut.
However, the minutes showed even broader agreement that the initial step would not commit the Fed to a specific pace of rate cuts going forward.
Markets are pricing in an 82% chance of a 25 basis point cut next month, CME’s FedWatch tool showed, with investors scaling back expectations for aggressive rate cuts after last week’s strong U.S. jobs report.
Investors’ focus on Thursday will be on inflation data in the form of the Consumer Price Index (CPI) to understand the Fed’s interest rate path, while corporate earnings season kicks off on Friday with bank earnings.
According to economists polled by Reuters, September’s CPI is likely to point to stable core inflation of 3.2% on an annual basis.
“If core inflation comes in higher than expected, yields could extend their recent gains and traders could further reduce expectations for a Fed rate cut in November,” said Tony Sycamore, market analyst at IG.
“A scenario that is likely to raise questions around the current Goldilocks story and unnerve stock markets.”
Changing US interest rate expectations have boosted the dollar, with the dollar index, which measures the currency against six key rivals, holding steady after rising overnight to its highest level since August 16. [FRX/]
The yen recently fetched 149.13 per dollar, while the euro traded at $1.09445.
In the commodities sector, oil prices were higher as investors grappled with rising tensions in the Middle East and their impact on oil supply, as well as a spike in demand as a major storm hit Florida.
Brent crude futures rose 0.4% to $76.86 per barrel, while U.S. West Texas Intermediate (WTI) futures rose 0.37% to $73.5 per barrel. [O/R]
(Reporting by Ankur Banerjee in Singapore; Editing by Muralikumar Anantharaman; To read Reuters Markets and Finance news, click https://www.reuters.com/finance/markets. For the state of Asian stock markets, click you at: 0 #.INDEXA)
