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Asia Stocks Rally as Rate Fears Ease, China Backs Lenders

Investors were heartened by less pessimistic predictions on US interest rates and buoyed by Beijing’s intervention in China’s deepening property crisis


Asian stocks rallied on Monday encouraged by softer predictions on US rate hikes despite the gloomy economic outlook.
Asian currencies and equities were encouraged after investors dialled back bets of a bigger interest rate hike by the US central bank this month. Reuters file photo.

 

Asian stocks rallied on Monday encouraged by softer predictions on US rate hikes despite the gloomy economic outlook.

China shares advanced but investors were treading carefully after the country’s growth slowed sharply in the second quarter missing expectations, and as widespread lockdowns to curb new Covid-19 outbreaks hit consumer spending and industrial activity.

Financials and property developers’ shares led the gains, as regulators stepped up their efforts to encourage lenders to extend loans to qualified real estate projects following a widening mortgage-payment boycott on unfinished houses.

 

Read more: China Mobilises Banks to Battle Widening Mortgage Boycott

 

Sentiment was also boosted by the governor of the country’s central bank vowing to increase the implementation of prudent monetary policy to support the real economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.4%, having shed 3.5% last week.

The Shanghai Composite Index rose 1.55%, or 50.04 points, to 3,278.10, while the Shenzhen Composite Index on China’s second exchange was up 1.48%, or 31.96 points, to 2,191.96. The blue-chip CSI300 index rose 1% to 4,292.59.

Tech giants listed in Hong Kong gained 2.7% in early trading, with food-delivery giant Meituan up 6.8% at lunch as shares in the territory marked their biggest percentage gain in six weeks.

The Hang Seng Index gained 2.7%, or 548.46 points, to close at 20,846.18, while the China Enterprises Index gained 3% to 7,168.89 points.

 

India Shares at One-Week High

Markets in Japan were closed for a public holiday but equities in South Korea climbed 1.8% to lead gains across Asia, as currencies and equities were encouraged after investors dialled back bets of a bigger interest rate hike by the US central bank this month.

Indian shares hit one-week highs on Monday, as investors snapped up beaten-down information technology and metal stocks, while a bounce in global equities also aided broader investor sentiment.

The NSE Nifty 50 index was up 1.19% at 16,239.40, as of 1010 GMT, while the S&P BSE Sensex rose 0.76% to 54,192.08. Both the indexes hit their highest since July 11, after recording their first weekly loss in four on Friday.

The Nifty IT index, which is down more than 30% this year, gained 3.3%.

 

ECB Poised to Raise Rates

Globally, stocks, US futures, oil prices and bond yields all rose, with European equities starting the week more than 1% higher and the euro was pushing up and away from parity at $1.0138 with a big week coming up.

The European Central Bank is set to raise rates for the first time in more than a decade on Thursday, the same day the bloc will be hoping Russia resumes gas supplies.

US stock futures were up more than 1% in early London trading.

Corporate earnings will be in sharp focus this week with Goldman Sachs, Bank of America, International Business Corp, Netflix, Tesla and Twitter due to report.

Of the 35 companies in the S&P 500 having reported, 80% have beaten Street expectations, according to Refinitiv. Analysts now expect aggregate year-on-year second-quarter profit growth of 5.6%, down from 6.8% at the beginning of the quarter.

Oil prices rose in the risk-on wave. President Joe Biden continued his trip to the Middle East hoping to get agreement on an increase in output, having seemingly come away from Saudi Arabia empty-handed.

After an early dip, Brent crude added $2.54, or 2.5%, to $103.70 a barrel, after a 2.1% gain on Friday.

 

Key figures

Tokyo – Nikkei 225 > UP 0.54% at 26,788.47 (Friday close)

Hong Kong – Hang Seng Index > UP 2.7% at 20,846.18 (close)

Shanghai – Composite > UP 1.55% at 3,278.10 (close)

New York – Dow > UP 2.15% at 31,288.26 (Friday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

Shanghai Holds Mass Testing As More Cities Extend Lockdowns

China Steps up Local Government Debt Issuance for Banks

 

Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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