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Markets update: Asian stocks are at their highest level in 2-1/2 years. The People's Bank of China reduces banks' reserve requirement ratios and adjusts 7-day and 14-day reverse repurchase rates. Japan's leadership election is moving to a second round; US Personal Consumption Expenditures data is expected.
Economic Calendar
Global Markets Roundup: 20 September 2024
Chinese stocks surged towards their strongest week since 2008, contributing to the rise of Asian shares to their highest levels in 2-1/2 years following Beijing's introduction of a substantial stimulus package to reinvigorate the economy. Additionally, the significant drop in oil prices indicates a positive outlook for disinflation on a global scale.
The Japan yen depreciated by 1% to reach three-week lows as markets speculated that Sanae Takaichi, the economic security minister who opposed interest rate hikes, might emerge victorious in the leadership contest of Japan's ruling Liberal Democratic Party on Friday. The Nikkei NI225 surged by 1.8%, accumulating a 5% increase for the week due to the weakening yen. European stock markets are anticipated to open slightly higher, with EUROSTOXX 50 futures FESX1! rising by 0.2% and FTSE futures Z1! increasing by 0.1%. Wall Street futures remained relatively stable. MSCI's comprehensive index of Asia-Pacific shares excluding Japan (.MIAPJ0000PUS) advanced by 0.5%, reaching its highest level since February 2022 earlier in the day. The index was on track for a weekly gain of 5.3%, primarily fueled by the remarkable recovery of Chinese shares.
China's top stocks surged by 3.5%, resulting in a weekly increase of 14.6%, the highest since November 2008. The Hang Seng index in Hong Kong also rose by 1.9%, marking an 11.2% increase for the week, its strongest performance since 2009. Beijing appears to be ready to implement significant stimulus measures in quick succession. As anticipated, the People's Bank of China reduced banks' reserve requirement ratio by 50 basis points on Friday and lowered the 7-day reverse repo rate by 20 bps. It also cut the 14-day reverse repo rate by 20 bps, marking the second reduction this week. Reuters revealed on Thursday that China is planning to issue approximately 2 trillion yuan ($284.43 billion) worth of special sovereign bonds this year as part of a new fiscal stimulus package.
Results from the initial round of voting by Japan's Liberal Democratic Party revealed that both economic security minister Sanae Takaichi, aged 63, and former defense minister Shigeru Ishiba garnered the highest number of votes, securing their places in the upcoming second round, which is expected to conclude at 0630 GMT. Market analysts are speculating that Takaichi, a prominent critic of the Bank of Japan's attempts to increase interest rates, may emerge as the winner, with current swaps suggesting a mere 30% likelihood of the central bank raising rates by the end of the year. Following the first round of voting, the dollar saw a 1% increase against the yen, reaching 146.23 USDJPY. Meanwhile, Treasury yields remained stable in Asia, having experienced an increase the previous day due to a decrease in U.S. weekly jobless claims, causing markets to reduce the probability of a substantial half-point rate cut by the Fed in November from 57% to 51%. In other regions, the euro's EURUSD value decreased by 0.45% to $1.1127 following reports indicating lower-than-anticipated inflation rates in France and Spain. This led traders to increase their speculation on a potential rate cut by the European Central Bank in October.
Commodities experienced a positive week due to China stimulus measures. Iron ore prices (SZZFV4) rebounded above $100 per metric ton, copper surpassed the crucial $10,000 per ton level, gold GOLD reached a new record high, and silver XAGUSD1! achieved its highest level in 12 years. Conversely, oil performed poorly and was on track for significant weekly losses following reports that Saudi Arabia might abandon its informal price target of $100 per barrel in preparation for increasing output. Brent futures BRN1! declined by 0.4% to $71.31 per barrel, marking a 4.2% decrease for the week, U.S. West Texas Intermediate crude futures, represented by CL1!, saw an increase of 18 cents, or 0.27%, reaching $67.85. This development could potentially lead to global disinflation as central banks intensify rate cuts, which would be beneficial for consumer spending.
Arabica futures benchmark KC1! on the ICE exchange reached a new 13-year high at $2.7505 per lb, ultimately closing up by 1.8% at $2.739/lb. Raw sugar futures SB1! hit a fresh 7-month peak at 23.71 cents per lb, later closing 0.5% lower at 23.31 cents/lb. The anticipation of Brazil entering one of the longest off-crop periods in decades disrupted speculators' strategy to short the sugar market, prompting them to cover their positions.
In Vietnam, the leading robusta coffee producer, local prices decreased this week ahead of the upcoming harvest, with traders noting that the weather conditions remain favorable. The potential surge in output from Vietnam could alleviate the upward pressure on arabica prices, as these two grades are somewhat interchangeable. Nevertheless, Vietnam faced adverse weather conditions earlier this year, and it is widely expected that the forthcoming crop will be affected.
Robusta coffee futures RC1!, which had reached their highest level in nearly 50 years last week, increased by 1.5% to $5,527 per ton. Among other soft commodities, white sugar futures SF1! dropped by 0.5% to $593.90 per ton. December New York cocoa CC1! rose by 2.1% to $8,122 per ton, following earlier volatile trading that saw an increase of over 10%. March London cocoa C2! rose by 1.9% to 4,622 pounds per ton.
The wheat contract with the highest activity on the Chicago Board of Trade (CBOT) ZS1! decreased by 0.8% to $5.79-3/4 per bushel, while soybeans ZS1! increased by 0.1% to $10.41-1/2 per bushel and corn ZC1! dropped by 0.4% to $4.11-1/2 per bushel. Throughout the week, wheat has risen by 2% following a decline the previous week, soybeans have seen an increase of nearly 3%, and corn has gone up by 2.5%.
Investors are anticipating the release of the core personal consumption expenditures (PCE) price index, which is the Federal Reserve's favored gauge of inflation, later today. Projections suggest a modest 0.2% increase for the month, with market opinions divided on the magnitude of a potential interest rate reduction by the Federal Reserve in November.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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