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01 October 2023

Asian shares gain on China, global trade hopes

A surge in government spending in China helped boost investor confidence in Asian markets on Thursday. (GETTY IMAGES)

By Reuters
Asian shares edged up cautiously for a third straight session on Thursday as hopes for a recovery in China's economy raised confidence about the outlook for global trade, sending shipping firms sharply higher.

Oil prices also inched up, reversing earlier falls, while gold prices dipped as investors grew more comfortable with riskier assets.

The euro held steady against the dollar ahead of a European Central Bank meeting expected to result in no changes in interest rates, though sterling weakened ahead of an expected rate cut from the Bank of England, also due later in the day.

Signs of improving sentiment in Asian markets reflect confidence that a surge in government spending in China and elsewhere could prevent an excessive downturn in economic growth. Chinese manufacturing data on Wednesday was also not as bad as some in the market had expected, helping bolster sentiment.

"I think it's safe to say China's economy won't fall that much. There's a bit of light here," said Katsuhiko Kodama, senior strategist at Toyo Securities in Japan.

The softening of a "Buy American" plan in the $900 billion (Dh3.3 trillion) US stimulus bill may also prove positive for global commerce, after US President Barack Obama expressed concern the original language could trigger a trade war.

The MSCI index of Asia-Pacific stocks outside Japan reversed earlier falls to gain 0.7 per cent as of 0515 GMT. However, Japan's Nikkei average dipped 0.2 per cent after swinging between gains and losses.

Shipping firms such as South Korea's Hyundai Merchant Marine were among the day's leading gainers after the Baltic Dry Index – which measures changes in the cost of shipping commodities – continued to gain, with a nearly 15 per cent rally on Wednesday.

The gains in that index reflect in part signs of recovering demand for raw materials in China, analysts said.

Optimism in regional markets was, however, tinged with caution following glum profit forecasts from companies such as US food maker Kraft

US employment is also expected to remain bleak, as investors focus on the monthly jobs data due out on Friday.

"The fact that China-related shares like shippers and steel are up on hopes for additional Chinese economic steps shows that sentiment isn't entirely gloomy, and market direction could change," said Noritsugu Hirakawa, a strategist at Okasan Securities.

Hong Kong and Shanghai posted the strongest gains among major Asian indexes with gains of 1-2 per cent each.

Shares in South Korea and Singapore posted modest gains, while markets in Australia and Taiwan were flat.



China is not the only one taking steps to revive growth, with governments globally ramping up spending, cutting taxes and bailing out banks or even industrial sectors.

Central banks meanwhile are cutting rates aggressively in a bid to revive growth. The Bank of England on Thursday was expected to lower already record low interest rates by at least another 50 basis points to 1 per cent.

The European Central Bank, however, is expected to keep its rates on hold for now at 2 per cent after four months of cuts.

The euro was little changed from late US trading on Wednesday at $1.2820 after slumping a day earlier when Fitch became the second credit ratings agency within two months to downgrade Russia's ratings.

Against the Japanese currency, the euro dipped 0.3 per cent to 114.48 yen while the dollar eased 0.2 per cent to 89.28 yen

Sterling dipped 0.4 per cent to $1.4413

Oil prices rose 15 cents to $40.46 a barrel, after starting Asian trade with falls that had been sparked by data on Wednesday showing a rise in US crude inventories.

Gold fell $1.3 to $903.55 as investors switched safe-haven assets for riskier ones such as stocks which may offer higher returns. Still, analysts at Goldman Sachs said gold's safe-haven appeal remained intact and should support prices in coming weeks.

Prices of bullion could reach $1,000 an ounce in the next three months, Goldman Sachs said in a report, boosting its forecast from its prior call at $700 an ounce.

Elsewhere, benchmark 10-year yields for Japanese government bonds dropped 2 basis points to 1.325 per cent after hitting a high of 1.350 per cent on Wednesday, the highest since mid-December.

March futures rose 0.12 point to 138.47 rebounding from a 2 1/2-month low of 138.28 touched the previous day.