Asian Shares Rise as Chinese Policies Boost Market Confidence
Asian shares mostly rose on Thursday, following positive movements in Chinese stocks after Beijing unveiled a series of measures to support struggling markets. Hong Kong saw a significant increase of 1.8%, while Shanghai surged by 3%. Benchmarks in Tokyo and Seoul also edged higher. In addition to the rise in Asian shares, U.S. futures and oil prices advanced.
China's central bank recently announced new rules to govern lending to property developers, contributing to the positive sentiment in the market. The central bank also stated its intention to cut bank reserve requirements, injecting around 1 trillion yuan ($141 billion) into the economy. These initiatives come as the Chinese economy has experienced slower growth, with forecasts for this year indicating growth below 5%, the lowest level since 1990 excluding the years of the COVID-19 pandemic. The real estate industry's debt crisis has further exacerbated these long-term challenges.
Chinese property developers experienced notable gains, with stocks such as China Evergrande Holdings increasing by 5.4% and Country Garden rising by 5.9%. The Hang Seng in Hong Kong jumped by 2.0% to 16,219.04, while the Shanghai Composite index climbed by 2.9% to reach 2,902.85.
Meanwhile, Tokyo's Nikkei 225 remained relatively unchanged in afternoon trading, slightly up by about 10 points to 36,236.47. Speculation is growing regarding the Bank of Japan potentially ending its negative rate policy later this year, which has prompted investors to closely monitor the potential impacts on inflation and the country's currency.
South Korea's Kospi inched up slightly by less than 1 point to 2,470.34 after the nation's central bank reported better-than-expected quarterly growth of 0.6% in the last quarter of 2023. Additionally, Sydney's S&P/ASX 200 advanced by 0.5% to 7,555.40.
In the United States, the S&P 500 set a new record for the fourth consecutive day, adding 0.1% to reach 4,868.55. The Nasdaq composite saw a 0.4% increase to 15,481.92, driven by gains in tech stocks. However, the Dow Jones Industrial Average did experience a slight drop of 0.3%, closing at 37,806.39.
Stocks have been steadily reaching record levels on hopes that lower inflation will convince the Federal Reserve to implement multiple interest rate cuts throughout the year. This expectation has already led to a considerable decline in Treasury yields, which can alleviate pressure on the economy and financial system.
Furthermore, a preliminary report from S&P Global indicated that business output growth reached a seven-month high, underscoring the economy's strength. Additionally, the report highlighted that prices charged by businesses experienced their slowest rate of increase since May 2020, which could be significant for Federal Reserve officials.
Later this week, the U.S. government is expected to release its estimate for the economic growth rate in the fourth quarter of 2023, which is anticipated to be around 2%. Although this indicates a slower pace compared to the previous quarter's vigorous 4.9% growth rate, it maintains the surprising resilience of the world's largest economy. Consumer spending has played a significant role in sustaining this growth, driving more than two-thirds of the economy.
Following this report, Treasury yields in the bond market rebounded, erasing earlier losses. The 10-year Treasury yield rose to 4.17% from 4.14% on Tuesday, while the two-year Treasury yield, which reacts more strongly to Fed expectations, held steady at 4.38% after dropping to 4.26% shortly before the report's release.
Investors will closely monitor economic reports coming out later this week, as they could further influence expectations for rate cuts throughout the year. On Thursday, the government will release its initial estimate of the economic growth rate for the last quarter of 2023. The following day, the latest monthly update on the preferred measure of inflation for the Federal Reserve will be provided.
In energy trading, benchmark U.S. crude oil prices rose by 32 cents to $75.41 per barrel. The international standard, Brent crude, increased by 28 cents to $80.32 per barrel.
In currency trading, the U.S. dollar edged up against the Japanese yen, rising from 147.51 yen to 147.65 yen. The euro also saw a slight increase, rising from $1.0884 to $1.0891.
