Stocks across Asia saw a rally, notably led by gains in Hong Kong and Shanghai, boosted by unconfirmed reports suggesting China’s intention to inject approximately 2 trillion yuan (equivalent to $278 billion) to support its struggling markets.
According to an undisclosed Bloomberg report, China is considering accessing offshore funds held by state-owned enterprises and local funds as part of this proposed bailout plan. The news resonated positively with markets, with Hong Kong’s Hang Seng rising 3.2% to 15,434.69, and the Shanghai Composite Index rising 0.7% to close at 2,776.06.
Shanghai had experienced a recent setback due to investor disappointment over China’s decision to maintain the prime lending rate despite concerns about the economic outlook. The Shanghai benchmark had fallen 2.7% the previous Monday, trading at its lowest levels since 2019. Until the last update, the Hang Seng had seen a 12% decline for the year.
Despite the possible positive impact of a substantial rescue plan, market analysts express caution and emphasize that the plan must inspire confidence to sustain market stability. Mizuho Bank’s Tan Boon Heng notes that the current Chinese market sell-off persists despite the rally in global stocks, creating increasing divergence rather than convergence.
Elsewhere in Asian markets, Tokyo’s Nikkei 225 index gave up earlier gains and closed down 0.1% at 36,517.57. The Bank of Japan, recognizing “extremely high uncertainties surrounding economies and financial markets”, declared its commitment to maintaining an ultra-loose monetary policy, keeping the reference interest rate at -0.1%.
The Bank of Japan’s policy statement also included a commitment to take additional easing measures if necessary. Speculation that the Bank of Japan could end its negative interest rate policy contributed to a drop in the Japanese yen, with the US dollar trading at 147.62 yen on Tuesday morning.
South Korea’s Kospi rose 0.6% to 2,478.61, and Australia’s S&P/ASX 200 added 0.5% to 7,514.90. The Bangkok SET remained virtually unchanged.
Focusing on US markets, on Monday the S&P 500 added 0.2% to reach 4,850.43, while the Dow Jones Industrial Average surpassed 38,000 points with a rise of 0.4% to 38,001.81. The Nasdaq Composite gained 0.3% to close at 15,360.29.
Notable moves in US stocks included Macy’s rising 3.6% after rejecting a takeover offer, SolarEdge Technologies rose 4% despite announcing a 16% workforce reduction and NuStar Energy jumped 18.2% following the announcement of its $7.3 billion Sunoco acquisition, including debt.
However, Archer Daniels Midland experienced a major setback, falling 24.2% after firing its chief financial officer amid an investigation into accounting practices. ADM also expects to report full-year 2023 earnings below analyst forecasts.
Looking ahead, the week is set for an avalanche of corporate earnings reports for the final quarter of 2023, with around 70 S&P 500 companies including American Airlines, Intel, Procter & Gamble and Tesla.
The government is scheduled to release its first estimate of economic growth in the final quarter of 2023 on Thursday. Economists expect continued growth, albeit at a slower pace than in the summer months, consistent with the Federal Reserve’s desire to avoid excessive economic strength that could contribute to inflation.
The latest reading of the Federal Reserve’s preferred inflation gauge will be released on Friday. Economists expect the reading to show that inflation remained stable at 2.6% in December compared to the previous month.
Treasury yields, a major market indicator, have declined since October on expectations of upcoming rate cuts. Early Tuesday, the 10-year Treasury yield was at 4.09%, down from 4.13% on Friday and a notable decline from the 5% seen in October.
In the commodities market, benchmark U.S. crude oil rose 9 cents to $74.85 a barrel on the New York Mercantile Exchange. Brent crude, the international standard, rose 6 cents to $80.12 a barrel.
Also read: ADM faces turbulence: CFO investigation, profit forecast cut sends shares down 12%