Market Overview

China gains hoist Asian stocks to two-year peak

Chinese stocks led Asian markets higher on Monday as investors bet on a steady recovery for the world’s no. 2 economy, though caution about the fate of U.S. stimulus kept the dollar firm and a central bank policy tweak unwound some of the yuan’s gains. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1% to 2-1/2-year highs, buoyed by a 2.4% gain in Chinese blue chips and a 2% rise by Hong Kong’s Hang Seng index. Japan’s Nikkei slipped 0.3% as investors fretted about corporate earnings.

The mood drove S&P 500 futures up 0.2% and futures trade pointed toward a positive start to European trade. EuroSTOXX futures STXEc1 rose 0.5%. FTSE futures FFIc1 and sterling were steady ahead of a Brexit summit later in the week. China has returned from an eight-day Mid-Autumn festival with investors encouraged by a robust rebound in tourism and ebbing coronavirus cases.

Qingdao city said on Monday it will conduct COVID-19 tests for the entire population of more than 9 million people over five days after a small number of new cases. In the U.S. midwest, infections are at record levels and the World Health Organization is urging fresh curbs for Europe.

Coronavirus aid plans in the United States are also in disarray, with the Trump administration on Sunday calling on Congress to pass a stripped-down relief bill while talks on a more comprehensive proposal were again at an impasse.

Chinese blue chips have gained 17% this year, compared with an almost 8% gain by the S&P 500. Foreigners’ buying of Chinese government bonds hit its fastest pace in more than two years last month. In currency markets, a 0.4% drop in the yuan dragged the China-sensitive Australian dollar lower and underpinned small but broad gains for the dollar against other majors. The People’s Bank of China has scrapped a requirement for banks to hold a reserve of yuan forward contracts, removing a guard against depreciation.

The euro edged 0.1% lower to $1.1819 and the yen firmed to 105.48 per dollar. The kiwi dipped 0.1% with the softer yuan to sit at $0.6661. In commodity markets, oil prices were back under pressure after the resolution of an oilworkers strike in Norway and the resumption of production after a storm in the Gulf of Mexico.

Brent crude futures slipped 1% to $42.41 a barrel and U.S. crude futures fell by the same margin to $40.17. Gold held steep Friday gains at $1,929 an ounce as investors stuck with bets that U.S. stimulus would eventually arrive and drive inflation to the benefit of bullion. The U.S. bond market is closed on Monday for Columbus Day.

China gains hoist Asian stocks to two-year peak, Reuters, Oct 12

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