China stock rally boosts Asian stock metrics ahead of Fed

A broker interacts while trading on his computer at a stock brokerage firm in Mumbai, India, February 26, 2016. REUTERS/Shalesh Andrade

SHANGHAI (Reuters) – An afternoon rally in Chinese stocks lifted a broad gauge of Asian stocks on Wednesday amid growing hopes that Beijing would provide more economic stimulus, while investors continued to monitor peace talks between Ukraine, Russia and the US Federal Reserve.

The Fed is expected to raise interest rates for the first time in three years thereafter on Wednesday (1800 GMT) and provide guidance on tightening ahead. Read more

European stock exchanges were preparing for a stronger opening. Across the region, Euro Stoxx 50 and Germany’s DAX futures are up 0.9% in early trades, and FTSE futures are up 0.6%.

US stock futures were also higher, with the S&P 500 e-minis index up 0.2%.

The rally in Asian stocks came a day after stock indices in mainland China and Hong Kong faltered in reaction to a spike in coronavirus cases in China and expectations of an interest rate cut by the People’s Bank of China faded.

China’s market volatility continued on Wednesday, with an early strong recovery in China’s CSI300 index (.CSI300) It evaporates late in the morning. But it rose after Vice Premier Liu He indicated that China plans to take measures to boost the economy and will also announce favorable capital market policies.

The CSI300 index is finally up more than 3.5%. Hong Kong’s Hang Seng Index (.HSI) It also extended gains in the afternoon, jumping more than 8% at one point, sending a more than 3% rise in MSCI’s broadest index of Asia-Pacific shares outside Japan. (.MIAPJ0000PUS.)

Elsewhere, Australian stocks (.AXJO) And Cosby in Seoul (.KS11) Japan’s Nikkei rose 1.1% (.N225) It rose 1.6%.

Liu’s comments helped allay fears that encouraging economic data in January and February had led to complacency among policymakers in Beijing. Read more

“People are concerned that (Chinese) policy makers may think that the economy is doing better, growth is picking up and there is no need for more political easing measures,” said Ting Lu, chief China economist at Nomura.

China has seen increasingly positive changes in its economic performance backed by surprisingly good economic data, but the impact of the recent resurgence of COVID-19 should be watched, a spokesman for the Statistics Bureau said on Tuesday. Read more

On Wednesday, Chinese health authorities reported a slight decrease in new cases compared to the previous day, although major Chinese cities continue to struggle to control the spread of the virus. Read more

Gains in Asia followed a comfortable rally on Wall Street overnight, driven by hopes of a resolution in Ukraine. S&P 500 . Index (.SPX) Gain 2.14%, the Nasdaq Composite Index (nineteenth) Jumped 2.92% and the Dow Jones Industrial Average (.DJI) It rose 1.82%.

Ukrainian President Volodymyr Zelensky said on Wednesday that peace talks looked more realistic but more time was needed, as Russian air strikes killed five people in the capital Kyiv and brought the number of refugees from the invasion of Moscow to three million.

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Analysts at ING said in a note that market moves in Asia will be “cautious” ahead of the Federal Reserve’s meeting later in the day.

Investors expect the US central bank to raise interest rates by at least 25 basis points amid rising rates. Traders will also be watching closely the Federal Reserve for details on how it plans to end its bond-buying program.

US bond yields fell in Asian trade, with the benchmark 10-year bond yield at 2.1545%, after earlier rising to 2.169%, the highest level since June 2019.

The return for the last two years was 1.8433% from a close of 1.857%.

The US dollar fell slightly against a basket of its peers, trading at 98.861, and fell against the yen at 118.22 albeit still near a five-year high. The euro rose 0.16% to $1.0969.

Oil prices, which were trading lower early in the session, turned higher, as Russia’s invasion of Ukraine continued to fuel volatility.

International benchmark Brent crude rose 0.93 percent to $100.84 a barrel, and US crude rose 0.44 percent to $96.86.

Highlighting the impact of global turmoil and higher oil costs, Japan reported a wider-than-expected trade deficit in February as the costs of energy-driven imports rose due to massive supply constraints adding to the vulnerabilities of the world’s third-largest economy. Read more

Spot gold was little changed at $1,916.61 an ounce.

(Reporting by Andrew Galbraith) Editing by Richard Boleyn, Simon Cameron Moore and Kim Coogill

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