Stocks creep higher on U.S. stimulus hopes, yuan sinks

In this news, we discuss the Stocks creep higher on U.S. stimulus hopes, yuan sinks.

SINGAPORE (Reuters) – Asian stock markets started the week with cautious gains on Monday, as investors clung to hopes of U.S. stimulus spending, as the dollar strengthened after a policy adjustment by the bank China’s central canceled some of the yuan’s significant gains.

The People’s Bank of China removed the requirement for banks to hold a reserve of yuan futures contracts, removing depreciation protection, which traders said hinted authorities were baffled by the gains recent.

The yuan fell 0.7% to 6.7331 at the start of trading, pulling the Australian dollar 0.2% lower to $ 0.7229. The setting of the onshore trading band at 0115 GMT will be closely watched as a guide to the authorities’ stance on the currency’s level.

The largest MSCI index of Asia-Pacific stocks outside of Japan edged up 0.1% at the start of trading. Australia’s S & P / ASX 200 rose 0.1% and New Zealand’s NZ50 hit a record high. Japan’s Nikkei lost 0.3%.

The Trump administration called on Congress on Sunday to pass a lean coronavirus bill, as discussions over a more comprehensive plan stalled again.

A new $ 1.8 billion White House proposal has drawn criticism from Democrats and Republicans, but investors appear optimistic that spending picks up at some point.

“The markets still have high hopes for a full-scale stimulus package, and are uncertain whether that happens this side of November or not,” said Tapas Strickland, economist at National Australia Bank.

Polls showing Democrat Joe Biden to lead Donald Trump in the US presidential race partially support that confidence, Strickland said, as Democrats push harder on spending.

“Markets should be very sensitive to Senate polls over the next few weeks, given the still high expectations of a full-scale US stimulus package, which to some extent if not passed before November, will depend on the overthrow of the Senate by the Democrats.

The Biden poll also helped the yuan’s gains rise on Friday, when Chinese markets reopened after the mid-autumn break and the currency jumped more than 1% in onshore trading.

Investors believed Biden would be less likely to spark new Sino-U.S. Trade disputes. The yuan is up 7.2% since the end of May, as the Chinese economy has led the global recovery from the coronavirus.

However, the BPC’s move on Saturday to reduce term reserve requirements, making it cheaper to broker the yuan or hedge against a rise, suggests that further gains may be tempered.

“The authorities have not stood in the way of the strength of the yuan, but this move could be seen as a sign that they want to slow the pace of appreciation,” said Khoon Goh, head of Asian research at ANZ Bank. .

“We still see room for further appreciation of the yuan, especially with China’s strong growth momentum … but the authorities want to encourage more two-way flows, and removing the reserve requirement will help.”

Other currency movements were modest, with the initial dollar weakness easing somewhat. The euro fell 0.1% to $ 1.1819 and the yen was broadly flat at 105.64 per dollar. The kiwifruit dipped 0.1% with the softer yuan to hit $ 0.6666.

In commodities markets, oil prices came back under pressure after a ten-day strike by oil workers in Norway was resolved late last week, which likely boosted production.

Brent futures slipped more than 1% to $ 42.28 a barrel and US crude futures fell about 1.4% to $ 40.04.

Gold maintained strong gains on Friday at $ 1,930 an ounce as investors remained stuck on the fact that the US stimulus would push inflation in favor of bullion.

The US bond market is closed Monday for Columbus Day.

Reporting by Tom Westbrook; Editing by Sam Holmes

Original © Thomson Reuters

Originally posted 2020-10-12 07:06:13.

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