Stocks were mainly higher across Asia along with U.S. and European equity futures after the latest policy move by China’s central bank to support its economy.
Activity is picking up as most global markets reopen from holiday closures, though Japanese equities remain shut for the remainder of this week. Equity indexes in Hong Kong and China advanced more than 1%, though the yuan showed little reaction, after the People’s Bank of China said it will increase the supply of cheap funding to banks, in line with market expectations. Australian shares posted modest gains, while South Korean shares declined. The Thai baht tumbled.
Markets start this year on the back of a strong performance for global stocks and sovereign bonds in 2019. Thursday gave investors the latest read on Chinese manufacturing, with the Caixin PMI dipping slightly from its November level but remaining well in the expansionary zone. On the trade front, U.S. President Donald Trump earlier this week said he expects to sign the first phase of a deal with China on Jan. 15.
“One of the biggest risks today may be that stocks have already priced in much of the good news,” said Bob Doll, senior portfolio manager at Nuveen Asset Management. “Stock prices can still climb higher, but we don’t expect results anywhere near 2019.”
The PBOC on Wednesday slashed the required cash reserve ratio for commercial lenders by 50 basis points, unleashing about 800 billion yuan ($115 billion) of liquidity into the financial system. The move will likely trigger a lower loan prime rate and make credit cheaper. The central bank said its “prudent monetary policy stance remains unchanged.”
“We expect the PBOC to continue to ease policy through 2020, trying to ensure growth remains around that 6% target,” Stephen Halmarick, head of global markets research at Commonwealth Bank of Australia, told Bloomberg TV in Sydney. “Easier monetary policy across Asia and the Pacific is a theme for this year as well.”
The Thai baht fell as much as 1.8%, its biggest drop since 2007, amid speculation the Bank of Thailand could be intervening to curb the currency’s strength.
Meantime, investors are keeping an eye on North Korea. Kim Jong Un said he was no longer bound by his pledge to halt major missile tests and would soon debut a “new strategic weapon.”
Here are some events to watch for this week:
Federal Open Market Committee minutes will be released on Friday.U.S. ISM manufacturing is due Friday. The Institute for Supply Management’s PMI is forecast to show a contraction for a fifth straight month.
These are some of the most recent moves in major markets:
Stocks
Futures on the S&P 500 Index rose 0.3% as of 11:28 a.m. in Hong Kong.Australia’s S&P/ASX 200 Index gained 0.3%.South Korea’s Kospi index lost 0.8%.Hong Kong’s Hang Seng Index added 1%.The Shanghai Composite Index rose 1.4%.Euro Stoxx 50 futures gained 0.5%.
Currencies
The yen held at 108.69 per dollar, up 0.1%.The Australian dollar was at 70.14 U.S. cents.The euro traded flat at $1.1220.The offshore yuan was steady at 6.9646 per dollar.
Bonds
The yield on 10-year Treasuries was at 1.92% in most recent trading. Futures dipped 0.1%. There is no cash trading of Treasuries with Japan closed.Australia’s 10-year bond yield rose one basis point to 1.38%.
Commodities
West Texas Intermediate crude added 0.3% to $61.25 a barrel.Gold gained 0.2% to $1,520.13 an ounce.
