Global equities showed mixed signals as the week concluded, a period that saw US and European indices breach record levels, driven by optimism surrounding central bank easing measures and fresh stimulus efforts from China.
The yen, reacting to Japan’s recent electoral outcome, swung into positive territory.
Europe’s Stoxx 600 Index inched upward, marking its most robust weekly performance since mid-August.
This came on the back of China’s promises of economic support, which boosted luxury and mining stocks.
Meanwhile, US futures slid slightly, following the S&P 500’s 42nd record close of the year. Both the US dollar and 10-year Treasury yields remained steady.
Daily updates from China on its stimulus initiatives, combined with growing bets for additional interest rate cuts from the Federal Reserve, have ignited risk appetite across global markets.
Investors are now anticipating the Fed’s preferred inflation metric, alongside a snapshot of consumer demand, which may provide additional clues regarding future rate decisions, particularly after Thursday’s strong data revision.
Yen’s Comeback:
The Japanese yen rebounded against the dollar following Shigeru Ishiba’s victory in the leadership race for Japan’s ruling party.
Ishiba, a seasoned politician who has held several key positions, including Defense Minister, is seen as aligned with the Bank of Japan’s strategy to gradually raise interest rates.
His rival, Sanae Takaichi, had recently criticized rate hikes, labeling them “foolish” in the current economic climate.
Chinese Market Surge:
In China, the CSI 300 Index surged by 4.5%, marking its best weekly gain since 2008. The People’s Bank of China initiated one of its boldest policy moves in decades, with Beijing unveiling a robust stimulus package aimed at stabilizing the nation’s slowing economy and bolstering investor confidence.
With stock turnover reaching an astonishing 710 billion yuan ($101 billion) within the first hour of trading on Friday, the Shanghai Stock Exchange experienced technical issues, including order-processing glitches and delays, as reported by brokerages.
In commodities, copper prices rallied, breaking above $10,000 per ton, while iron ore surged past $100 per ton.
Urgency in Policy:
By convening their politburo meeting in September instead of the usual December, China’s leadership signaled an urgency in their economic strategy, indicating that more aggressive action would be taken to meet their 5% growth target.
Senior analysts, including Robert Carnell of ING Groep NV, highlighted in a note that this week’s bold policy moves by the People’s Bank of China are likely the first of many.
Commodity Markets:
Oil prices stabilized after a sharp two-day decline, though they remain poised for a substantial weekly drop due to the potential for increased supply from OPEC members Saudi Arabia and Libya.
Meanwhile, gold is heading for its third consecutive weekly gain, having reached new record highs, as expectations build that the Federal Reserve will maintain its aggressive approach to interest rate cuts this year.
