Markets Jun 03

Markets rise on stimulus hopes, economic data

Asian markets are all up, boosted by local sentiment, plus positive news in Germany and expectations of further support in the US

Markets rise on stimulus hopes, economic data
A worker sprays water as he cleans the windows on the exterior of a high-rise building in Beijing on June 3, 2020. Photo: Noel Celis / AFP

(ATF) Expectations of more stimulus targeting economies and consumers ravaged by the coronavirus lifted Asian markets even as US-China tensions continued to simmer. Investors are also eyeing PMI survey data in Asia and Europe to see if the easing of restrictions last month is starting to yield economic fruit.

The latest PMI data for China published this morning showed the first increase in activity in the services sector for four months. The seasonally adjusted Caixin China General Services Business Activity Index rose from 44.4 in April to 55.0 in May to signal the first increase in services activity since January.

That is its highest level since October 2010. The Caixin China Composite Output Index also jumped to 54.5 in May from 47.6 the month before, as output in both the manufacturing and service sectors expanded sharply.

“Companies were relatively optimistic about the economy’s forward momentum, and look forward to implementation of the policies announced during the annual session of China’s top legislature,” Wang Zhe, senior economist at Caixin Insight Group, said.

Nikkei, Kospi, ASX and Hang Seng all up

Japan’s Nikkei rose 1.15% amid the second phase of reopening in Asia’s second biggest economy – shutdown requests were lifted for movie theatres, gyms, and department stores with no history of problems.

South Korea’s benchmark Kospi surged 2.48% after the government announced a 35.3 trillion won ($28.8 billion) supplementary budget and Australia’s S&P ASX 200 index climbed 1.28% even as Treasurer Josh Frydenberg confirmed on Wednesday that Australia was now in a recession, ending 29 years of growth.

“The upshot is that we think GDP will fall by a much larger 9% in Q2 before gradually firming up in the second half of this year,” Ben Udy, the Australia & New Zealand Economist at Capital Economics, said.

Meanwhile, Hong Kong’s Hang Seng benchmark climbed 1.2% and China’s mainland benchmark CSI300 advanced 0.55%

But credit markets surged with the Asia IG index moving in by 5bps and sovereign CDS 3-10 bps tighter. This has triggered a wave of issuance as yield-hungry investors piled in – Singtel, Kaisa Group and Yinchuan Tonglian are in the market with dollar bond offerings.

Overnight, a pledge of support from the German government and expectations of a second round of stimulus in the US boosted sentiment.

The Dow Jones Industrial Average climbed 1.05%, the S&P 500 gained 0.82%, and the Nasdaq Composite added 0.59%.