Asian Stocks Buoyed by China Stimulus as Crude Climbs Above $34
Asian stocks rallied, emerging-market currencies strengthened and crude oil climbed to an eight-week high as monetary stimulus in China brightened prospects for the world’s second-largest economy. European equity futures declined.
Benchmark share indexes advanced across most of Asia after the People’s Bank of China cut lenders’ reserve requirements, freeing up funds to help spur lending in the nation. The yuan gained for the first time in eight days and higher oil prices buoyed Malaysia’s ringgit. Copper retreated after a gauge of Chinese manufacturing declined, matching its lowest level of the past seven years. Gold rose and Japan sold 10-year debt at a negative yield for the first time.
While February marked a fourth consecutive monthly decline in global stocks, a benchmark equities index rallied more than 5 percent since Feb. 11. Mounting signs that American consumers can still power the world’s largest economy and hints from central banks in Asia and Europe that more stimulus is at the ready underpinned the revival, along with rebounds in crude oil and the yuan.
“Market sentiment is on its way toward a recovery, but the slightest bad news can still rock it,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo.
The cut in Chinese lenders’ reserve requirements was the first in four months and comes after the economy expanded last year at the slowest pace in a quarter century. The nation’s parliament will gather on Saturday for an annual meeting, where plans for 2016 and the next five years will be outlined.
The MSCI Asia Pacific Index rose 0.8 percent as of 7:08 a.m. London time, headed for its biggest gain in a week. Benchmarks in Hong Kong, Australia and Taiwan all rallied 0.9 percent. The Shanghai Composite Index gained 1.7 percent, trimming its loss for the year to 23 percent.
China’s $5.3 trillion stock market will rebound as much as 20 percent in the “short term” as economic growth picks up and yuan volatility decreases, according to Lirong Xu, chief investment officer at Franklin Templeton’s money-management unit in Shanghai. That view was echoed by Gao Ting, head of China strategy at UBS Securities Co. in Shanghai, who said sentiment is “overly pessimistic” and there’s a growing chance of a rally within the next three months as the central bank loosens monetary policy.
Standard & Poor’s 500 Index futures rose 0.1 percent after the U.S. benchmark retreated 0.8 percent on Monday. Contracts on the Euro Stoxx 50 Index fell 0.2 percent.
The yuan strengthened 0.2 percent versus the dollar as the People’s Bank of China raised its daily reference rate for the first time in a week. The currency strengthened 0.3 percent in February, after losses of 1.3 percent or more in each of the previous three months. An official manufacturing purchasing managers index dropped to 49 in February, missing the median estimate of 49.4 in a Bloomberg News survey of economists, data showed Tuesday. It hasn’t been weaker since January 2009.
“With a stronger fixing, they’re trying to ensure a stable yuan even as they ease policy through the reserve-requirement-ratio channel,” said Khoon Goh, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “There’s potential for further RRR cuts, given that today’s PMI data was weak.”
Malaysia’s ringgit strengthened 0.7 percent versus the dollar, climbing for a fourth day as the rebound in crude prices brightens prospects for Asia’s only major net oil exporter. The Australian dollar rose 0.3 percent, reversing an earlier decline. Australia’s central bank kept its benchmark interest rate at a record-low 2 percent at a Tuesday policy meeting and said low inflation offers scope for easing.
The Japanese government got paid to borrow money for a decade for the first time, selling 2.2 trillion yen ($20 billion) of the debt at an average yield of minus 0.024 percent on Tuesday. The benchmark 10-year bond yield dropped to minus 0.075 percent after the auction, matching a record low.
Money-market rates declined in China as the cut in lenders’ reserve requirements freed up funds. The one-day repurchase rate, a gauge of interbank funding availability, dropped four basis points to 1.94 percent in Shanghai, while the seven-day rate was six basis points lower at 2.28 percent.
U.S. Treasuries advanced, pushing the 10-year yield down by one basis point to 1.73 percent. The securities returned 3 percent in the first two months of this year, their biggest back-to-back gain since January 2015, according to the Bloomberg World Bond Indexes.
Crude oil futures climbed 1.5 percent to $34.25 a barrel in New York, headed for the highest settlement price since Jan. 5.
Copper fell 0.2 percent on the London Metal Exchange, dragged lower by the deterioration in China’s manufacturing. Gold advanced 0.2 percent, building on an 11 percent jump in February that marked its biggest monthly increase since January 2012.
“Chinese growth concerns have boosted the safe-haven appeal of gold,” said Bernard Aw, a strategist at IG Asia Pte in Singapore. Gains may be capped on Tuesday by the “short-term boost to risk appetite from China’s easing,” he said.