SYDNEY- Asian shares blipped higher on Monday after Beijing surprised markets by trimming a key interest rate for the first time since 2015, stirring speculation that more stimulus was on the way for the world’s second-largest economy.
China’s central bank cut rates on seven-day reverse repurchase agreements by five basis points to 2.50 percent, a move that nudged the yuan higher while lowering Chinese bond yields.
The news helped Shanghai blue chips recoup early losses to rise 0.3 percent, though the initial reaction was cautious overall. MSCI’s broadest index of Asia-Pacific shares outside Japan also moved 0.3 percent higher.
Japan’s Nikkei added 0.38 percent, and was just short of its recent 13-month top. E-Mini futures for the S&P 500 were all but flat, as were EUROSTOXX 50 futures.
Beijing’s policy move added to hopes it might also be more serious about making progress in trade talks with the United States.
On Saturday, Chinese state media said the two sides had “constructive talks” on trade in a high-level phone call that included Vice Premier Liu He, US trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
“Markets remain at risk of further short-term volatility given issues around trade, Iran & the Middle East, impeachment noise and weak global economic data,” said Shane Oliver head of investment strategy and chief economist at AMP Capital.
“But valuations are okay – particularly against low bond yields – global growth indicators are expected to improve through next year and monetary and fiscal policy are becoming more supportive.”
In currency markets, the dollar was little changed against its main peers on Monday and well within recent tight trading ranges. Indeed, volatility in the market has been the lowest in decades recently and shows no sign of shifting.
The dollar edged up on the safe-haven yen to 108.81, after bouncing on Friday. Chart support lies at 108.23 with stiff resistance at 109.48.
The euro idled at $1.1058 having found support at $1.0987 last week. Investors are awaiting the first major speech by European Central Bank President Christine Lagarde due on Friday for clues on future policy. – Reuters