Wednesday, September 27, 2023

Asian shares advance as China data better than feared

Asian shares advance as China data better than feared
July 15, 2021

TOKYO (Reuters) – Asian shares advanced on Thursday as economic data from China was largely more resilient than expected, and as US Federal Reserve Chair Jerome Powell said tapering of its massive stimulus was still a way off.

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 0.4%, with Hong Kong's Hang Seng (.HSI) rising 1.0%.

Mainland Chinese shares were little changed with CSI300 index (.CSI300) almost flat.

China's second-quarter economic growth fell just short of forecasts on an annual basis, with GDP growth slowing to 7.9% from a year earlier from a record 18.3% expansion in the January-March period. But seasonally adjusted growth of 1.3% on the quarter in April-June was slightly better than expected.

Monthly data for June, including retail sales, industrial output and fixed investments, showed growth softened but not as much as expected, adding to views that policymakers may do more to support the recovery.

Earlier in the day, China's central bank partially rolled over maturing, one-year medium-term lending facility (MLF) loans, injecting 100 billion yuan ($15.46 billion).

Around 1 trillion yuan in long-term liquidity was also released into the Chinese financial system from Thursday after the PBOC last week said it would cut the amount of cash banks must hold as reserves.

"On the whole the PBOC is loosening but it is not flooding the banking system like the Fed does. And today's economic data wasn't that bad," said Masahiko Loo, portfolio manager at AllianceBernstein.

Japan's Nikkei bucked the trend, with Nikkei (.N225) falling 0.9%, hurt by worries about rising domestic COVID-19 infections.

Wall Street shares were mixed, with S&P (.SPX) ending 0.12% higher and Nasdaq (.IXIC) down 0.22%.

In testimony to the U.S. House of Representatives Financial Services Committee, Powell said the U.S. economy was "still a ways off" from levels the central bank wanted to see before tapering its monetary support. read more

He also said he is confident recent price hikes are associated with the country's post-pandemic reopening and will fade.

His comments came after data published this week showed consumer prices increased by the most in 13 years in June while producer prices accelerated to the largest annual increase in more than a decade.

Powell gave fresh assurance to the markets that the Fed is not too hawkish about taming inflation, said Chotaro Morita, chief rates strategist at SMBC Nikko Securities.

Bond yields dipped globally, with the 10-year U.S. Treasuries yield slipping to 1.336% , having peaked out at 1.423% on Wednesday.

The yield on inflation-protected bonds, sometimes called the real yield, dropped below minus 1.0% , staying near its lowest levels since February.

"Given declines in bond yields started before Powell's speech, the market was probably driven more by short-covering and unwinding of underweight positions than Powell's comments per se," SMBC Nikko's Morita also added.

In the currency market, Powell's dovish stance put a dent on the US dollar.

The euro bounced back to $1.1826 from Wednesday's three-month low of $1.1772. The dollar stood at 109.88 yen after 0.6% fall on Wednesday.

The Chinese yuan dipped to 6.4693 per dollar in Asia after hitting a three-week of 6.4508 overnight.

Gold jumped to a one-month high of $1,829.8 per ounce on Wednesday and last stood at $1,826.1 .

Oil prices eased after major global oil producers came to a compromise about supply and after US data showed demand slacked off a bit in the most recent week. 

U.S. crude futures dropped 1.0% to $72.40 per barrel while Brent futures lost 0.8% to $74.18 per barrel.