Asian stocks gain as Chinese equity steps outweigh Evergrande liquidation

Tokyo — Asian stocks started the week on the front foot, as new steps by Beijing to stabilise the local market outweighed the drag on sentiment from the liquidation of property giant China Evergrande.

However, investors were also sensitive to geopolitical risks with oil rising after a Houthi missile attack caused a fire on a fuel tanker in the Red Sea and a drone attack killed three US troops in Jordan.

The dollar and US Treasury yields hovered in the middle of recent ranges before a highly anticipated Federal Reserve policy meeting later this week.

The mood in Asia was upbeat with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.7% by 6.10am GMT (8.10am).

The main drag to stocks came from a Hong Kong court order to liquidate Evergrande, the poster child of China’s property meltdown.

Hong Kong’s Hang Seng trimmed gains on the news to be up 0.74%, off the 1.9% gain made after China’s securities regulator said on Sunday it will fully suspend the lending of restricted shares.

Mainland China blue chips struggled to make headway early in the session, and eventually slumped 0.64%.

Elsewhere though, Chinese stimulus optimism provided additional momentum to markets that had already started the day on a firm footing. Japan’s Nikkei closed up 0.77%, while South Korea’s Kospi advanced 1.47%.

“People want to believe in what [Beijing is] doing, it’s just that they had a little bit of a hiccup in terms of communicating their policy intent at the beginning of the year,” said Damien Boey, chief macro strategist at Barrenjoey in Sydney.

“Now, authorities seem to be trying to rectify that [and] unsurprisingly, you are now starting to see stabilisation in Chinese equities,” he said. “It may not exactly be the bottom right now, but I think things will eventually get better with a few bumps along the way.”

US stock futures pointed slightly lower after the S&P 500 slipped 0.07% on Friday to snap five consecutive days of fresh all-time closing highs.

Coin toss

The backdrop for that was continued moderation in US consumer inflation in Friday’s data, which added to the narrative for Fed rate cuts in coming months but also suggests policymakers have little pressure to rush.

Markets expect the Fed to keep policy steady on Wednesday, but will be hunting for clues on when a first rate cut might come. Economists mostly predict June, but traders are pricing the risk of a March move at essentially a coin toss, according to CME Group’s FedWatch Tool.

The US dollar index, which tracks the currency against six major peers, stuck to the middle of its range of the past two weeks at 103.52, little changed from Friday.

Long-term Treasury yields declined about three basis points to 4.1315%, putting them near the centre of their range since January 18.

Last week’s US data continued the “remarkable run” of not-too-hot and not-too-cold economic indicators, pointing to a soft landing and a May start to policy easing, Commonwealth Bank of Australia strategists wrote in a client note.

Odds for a March move should continue to be priced out this week, leading the dollar index to test 104 and bond yields to rise “modestly”, they said.

The dollar was little changed at ¥148.06, while the euro eased 0.1% to $1.08395. Sterling was steady at $1.2704.

In energy markets, Brent crude futures rose 29c, or 0.4%, to $83.84 a barrel and US West Texas Intermediate crude gained 34c, or 0.4%, to $78.35 a barrel amid escalating risks of a widening of the Middle East conflict, which could disrupt supplies.

Safe-haven gold added 0.33% to $2,024.91.

Cryptocurrency bitcoin ticked up to $42,178.

Reuters