Asian stocks climb on China boost

November 05, 2024 (MLN): Asian stocks advanced following a slew of positive headlines from China that supported sentiment. The dollar was steady as the clock ticks down to a tight US election, Bloomberg reported.

Chinese equity benchmarks rose about 2% to lead the region’s gains. Japan’s Nikkei 225 jumped following a public holiday, while shares in Australia and South Korea slipped.

The Bloomberg Dollar Spot Index was flat and the 10-year Treasury yield advanced one basis point.

After a cautious start to the day, stocks turned higher upon data that showed China’s service activity expanded at the fastest pace since July, and comments from the premier that the country has ample policy room.

Sentiment also got a lift after the nation’s top legislative body reviewed a proposal that aims to reduce the financial burden of local officials.

A greater focus for the week is on the US presidential vote, as polls show Americans narrowly split between Donald Trump and Kamala Harris.

The likelihood of a disputed result may drag the vote count out for weeks, spurring a potential rise in volatility.

“It would absolutely make a lot of sense for the Chinese government to be keeping some of their stimulus powder dry in expectation and trying to understand what is going to happen out of the United States,” James Sullivan, head of APAC equity research at JPMorgan Securities Singapore, told Bloomberg TV. “A Trump victory is more in the price than a Harris victory.”

There are additional catalysts likely to move the market this week. Election Day will quickly be followed on Thursday by the Federal Reserve’s decision and Jerome Powell’s press conference, where he’ll give details on the central bank’s interest-rate path.

A big chunk of US firms are due to report earnings.

“The US dollar is probably the cleanest expression, the most obvious expression for this week,” Chris Weston, Pepperstone Group’s head of research, told Bloomberg TV.

A Harris victory coupled with a split Congress warrants selling of the US currency, while “if we get a Trump win you’ll probably see a little bit of a pop in the dollar, 1% or 2% or so over a day or two.”

Elsewhere, Australia’s central bank left its key interest rate unchanged at 4.35% as expected, spurring limited market reactions. The board highlighted the “high level of uncertainty” about the international outlook.

In Japan, a key potential ally for the weakened government, Yuichiro Tamaki, said the central bank shouldn’t raise interest rates again before March, urging it to closely examine the results of next year’s wage deal results before moving on policy again.

The yen slipped against the dollar. Japanese stocks will get an additional 30 minutes of trading.

In commodities, gold fell as the market braced for a tight US election. Oil steadied after jumping almost 3% on Monday on heightened tensions in the Middle East and OPEC+’s move to extend supply curbs.

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