© Reuters. FILE PHOTO: A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 26, 2016. REUTERS/Shailesh Andrade
By Andrew Galbraith
SHANGHAI (Reuters) – An afternoon surge in Chinese equities lifted a broad gauge of Asian shares on Wednesday on rising hopes Beijing will roll out more economic stimulus, while investors continued to watch Ukraine-Russia peace talks and the U.S. Federal Reserve.
The Fed is expected to raise rates for the first time in three years later on Wednesday (1800 GMT) and give guidance on future tightening.
U.S. stock futures also pointed higher, with S&P 500 e-minis, up 0.2%.
The rise in Asian shares came a day after mainland China and Hong Kong equity indexes had tumbled in reaction to spiking coronavirus infections in China and fading expectations for a rate cut by the People’s Bank of China.
Chinese market volatility continued on Wednesday, with a strong early rebound in China’s CSI300 index evaporating by late morning. But it charged higher after Vice Premier Liu He indicated China plans to take measures to boost the economy and would also announce policies favourable to capital markets.
The CSI300 was last up more than 3.5%. Hong Kong’s Hang Seng index also extended gains in the afternoon, surging more than 8% at one point, leading a more than 3% rise in MSCI’s broadest index of Asia-Pacific shares outside Japan.
Elsewhere, Australian shares and Seoul’s Kospi were up about 1.1%, while Japan’s Nikkei stock index rose 1.6%.
Liu’s comments helped to ease worries that encouraging economic data for January and February were leading to complacency among policymakers in Beijing.
“People are concerned that (Chinese) policymakers would believe that the economy is doing much better and growth is rebounding and there’s no need for further policy easing measures,” said Ting Lu, chief China economist at Nomura.
China has seen increasing positive changes in its economic performance backed up by surprisingly good economic data, but the impact of the latest COVID-19 resurgence need to be watched, a statistics bureau spokesman said on Tuesday.
On Wednesday, Chinese health authorities reported a slight drop in new cases compared to a day earlier, although major Chinese cities continue to grapple with controlling the spread of the virus.
The gains in Asia followed a relief rally overnight on Wall Street driven by hopes of a resolution in Ukraine. The S&P 500 gained 2.14%, the Nasdaq Composite jumped 2.92% and the Dow Jones Industrial Average rose 1.82%.
Ukrainian President Volodymyr Zelenskiy said on Wednesday peace talks were sounding more realistic but more time was needed, as Russian air strikes killed five people in the capital Kyiv and the refugee tally from Moscow’s invasion reached 3 million.
EYES ON FED
Analysts at ING said in a note that market moves in Asia would be “cautious” ahead of the Fed meeting later in the global day.
Investors are expecting the U.S. central bank to raise interest rates by at least 25 basis points amid surging prices. Traders will also be closely watching the Fed for details on how it plans to end its bond-buying program.
U.S. bond yields fell in Asian trade, with the benchmark 10-year note yield at 2.1545%, after earlier rising to 2.169%, the highest since June 2019.
The two-year yield was last at 1.8433% from a close of 1.857%.
The U.S. dollar was down slightly against a basket of peers, trading at 98.861, and lower against the yen at 118.22 albeit still near a five-year high. The euro edged up 0.16% to $1.0969.
Oil prices, which had traded lower early in the session, turned higher, with Russia’s invasion of Ukraine continuing to stoke volatility.
Global benchmark Brent crude rose 0.93% to $100.84 per barrel, and U.S. crude added 0.44% to $96.86. Highlighting the impact of global disruptions and soaring oil costs, Japan reported a wider-than-expected trade deficit in February as an energy-driven surge in import costs caused by massive supply constraints added to vulnerabilities for the world’s third-largest economy.
Spot gold was little changed at $1,916.61 per ounce.
China share surge boosts Asian equity gauges ahead of Fed