News Sep 28

Stocks rally on Wall Street gains, China optimism

Rising Chinese industrial profits boost sentiment; gains limited by surging coronavirus cases, deepening Sino-US tensions; oil falls 

Stocks rally on Wall Street gains, China optimism
People wearing protective suits accompany a coffin on a truck near Los Ceibos hospital in Guayaquil, Ecuador, amid the coronavirus outbreak, which has now claimed over a million victims and ravaged the world economy, inflamed diplomatic tensions and upended lives from Indian slums and Brazilian jungles to America's biggest city. Photo: Jose Sanchez / AFP.

(ATF) Asian stocks rallied on Monday as fresh data showed China’s economy continues to grow, buoyed by Wall Street gains at the end of last week amid signs that an agreement may be near on more stimulus for the worlds largest economy.

Chinese stocks rose on a spate of bargain-hunting following last week’s heavy sell-off but pared gains as optimism gave way to dimming hopes for an end of the Sino-US trade row. Shares in China’s largest semiconductor maker SMIC tumbled in Hong Kong after the White House slapped restrictions on exports to the company.

Hong Kong’s China stocks-heavy Hang Seng Index climbed after data showed Chinese industrial profits climbed for a fourth-successive month in August. Firms’ profits grew 19% year-on-year to 612.81 billion yuan ($90 billion), the statistics bureau said.

Economic indicators in August, ranging from exports to producer prices and factory output, have all pointed to a further pickup in the industrial sector thanks to a slew of measures to kick-start the world's second-biggest economy. That has in turn has lent support to the global recovery, though the spike in worldwide Covid-19 cases has raised fresh risks.

Chinese optimism also boosted European stocks in early trade.

“The data shows that whilst concerns are growing over a slowing economic recovery in Europe and the US, the economic recovery in China, the worlds second largest economy has been gathering momentum,” wrote Fiona Cincotta at GAIN Capital.

The broad gains in Asia follow a Wall Street rally on Friday though analysts expect the gains to be short-lived as expectations for economic growth start to falter.

Fear of prolonged US-Sino tension

Traders are awaiting the first US presidential debate this week, which could prove crucial in determining November's election, with many worried that a close vote might mean the result is delayed or even challenged by the loser. With rhetoric over the use of Chinese technology by American firms escalating over the weekend, investors are worried ties between the world’s two most influential economies will remain strained even after the election.    

The coronavirus still weighs heavily on investors, with the death toll topping one million and the World Health Organization warning that the figure could double without more global collective action.

While there were indications last week that both sides of Congress were making progress in agreeing on a new relief package and as many other world leaders are unveiling fresh fiscal measures to support their economies, concern remains that US lawmakers remain at loggerheads.

"The doomy mood music's soundboard remains tuned to growing concerns about rising Covid-19 case counts and whether policymakers have ammunition to react," AxiCorp's Stephen Innes said. "In the US, this has centred on whether further fiscal stimulus might be forthcoming before the election.”

Oil prices fell 0.7% to on concern that rising coronavirus-mitigation restrictions will reduce demand for the fuel in coming months.

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Asian Markets

· Japans Nikkei 225 index advanced 1.3%

· Australias S&P ASX 200 fell 0.2% 

· Hong Kongs Hang Seng index climbed 1%

· Chinas CSI300 inched up 0.3%

· The MSCI Asia Pacific index climbed 0.7%.

Stock of the Day

SMIC shares were battered after US imposed restrictions on exports to China's biggest chipmaker. Suppliers of certain equipment to Semiconductor Manufacturing International Corporation will now have to apply for individual export licenses, according to reports. The stock fell 7% in Hong Kong trade.