Broader stock market gains were tempered in the wake of lacklustre economic data - US job growth slowed more than expected in August - although even this was seen as a positive factor for equities.
Asian stocks tip-toed higher on Monday amid a cautious market mood as investors hoped for stimulus to support growth in the world’s major economies MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1%. The Shanghai Composite Index was up 0.4% . Australian stocks edged up 0.1%, South Korea’s KOSPI rose 0.7% and Japan’s Nikkei was up 0.4%. The Dow rose 0.25% and the S&P 500 edged up 0.1% on Friday. Global equity markets received a lift after China’s central bank said on Friday it was reducing how much cash banks must hold in reserve, releasing liquidity to shore up an economy slowed by the Sino-U.S. trade conflict.
Underlining the need for more stimulus, data on Sunday showed China’s exports unexpectedly fell in August as shipments to the United States plummeted. Risk sentiment was also fortified as Federal Reserve Board Chairman Jerome Powell said Friday that the central bank would continue to act “as appropriate” to sustain economic expansion in the world’s biggest economy.
Broader stock market gains were tempered in the wake of lacklustre economic data – US job growth slowed more than expected in August – although even this was seen as a positive factor for equities.
“Equities usually respond negatively to soft data. But the fact that the U.S. jobs report shows the market is banking on stimulus, expecting the Fed to respond to economic weakness with rate cuts,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.
Buoying market confidence on Monday were expectations that the European Central Bank would cut interest rates on Thursday.
“The equity markets will receive a further lift and consolidate their recent gains if they can confirm the ECB’s dovish stance,” Ichikawa at Sumitomo Mitsui DS Asset Management said.
The dollar was capped as U.S. yields came off two-week highs after Friday’s soft U.S. jobs report also raised expectations for a Fed rate cut. The greenback traded at 106.840 yen, off the one-month peak of 107.235 scaled late last week.
The euro was steady at $1.1025, weighed down ahead of Thursday’s ECB policy decision and near a 28-month low of $1.0926 set last week. The Australian dollar, sensitive to shifts in broader risk appetite, hovered near a five-week peak of $0.6862 set on Friday.
The pound was little changed at $1.2282. Sterling has bounced from a three-year low set a week ago as the threat of Britain leaving the European Union without a deal on Oct. 31 was seen to diminish. But political uncertainty remains, preventing the pound from regaining further ground. British lawmakers will on Monday vote on whether to hold an early election.
The 10-year U.S. Treasury yield was at 1.5670% after bouncing to 1.6080% on Friday, its highest since Aug. 23. Brent crude oil futures gained 0.5% to $61.85 per barrel after Saudi Arabia signalled that production cuts will continue under a new energy min