Market Close Sep 02

US stimulus hopes spurs risk appetite

Urgency of passing US relief bill lifts markets; Australia stimulus hopes rise after economy logs first recession in 29 years; Trump’s TikTok threat troubles

US stimulus hopes spurs risk appetite
Treasury Secretary Steven Mnuchin walks through the Capitol building speaking to reporters. Hopes are rising that a deal on a further stimulus package will be reaching in the not-too-distant future. File photo by AFP.

(ATF) Hong Kong: Asian markets bounced back on hopes that additional US stimulus measures would come through to claw back earlier losses triggered by US President Donald Trump’s threat to shut down TikTok.

US Treasury Secretary Steven Mnuchin told a Senate coronavirus subcommittee that unemployed Americans urgently need more Federal help and he was “prepared to sit down with the Speaker at any time to negotiate”, referring to House Speaker Nancy Pelosi.

The urgency for passing the relief bill was also expressed by Federal Reserve Governor Lael Brainard, who said “the economy continues to face considerable uncertainty associated with the vagaries of the Covid-19 pandemic, and risks are tilted to the downside”.

Japan’s Nikkei 225 index added 0.47%, while Australia’s S&P ASX 200 jumped 1.84%, outperforming the region after expectations the government would do more to rescue the economy after its first recession in 29 years. The MSCI Asia Pacific index advanced 0.47%.

Australia’s GDP in the June quarter fell more than expected – the 7.0% quarter-on-quarter plunge in Q2 GDP was weaker than the Bloomberg estimate of -6%, but shares rallied on the expectation of additional stimulus.

“We suspect that the rebound outside Victoria will be sufficient to generate a small 0.5% q/q rise in Q3 GDP. And while the drop in GDP last quarter wasn’t much larger than the RBA had anticipated, it will keep the pressure on the Bank to announce more stimulus,” said Marcel Thieliant, senior Australia & New Zealand economist at Capital Economics.

Wednesday’s data confirmed Australia’s first recession in 29 years – in the March quarter, Australia’s economy shrank by 0.3%.

“Despite looking bad, this is still a relatively strong outcome for Australia, when compared against the rest of the Asia-Pacific group, and with New Zealand still to report 2Q GDP, there is a good chance that Australia ends up in the 'less negative' half of the table as far as the cumulative loss to GDP since 4Q19 goes, a little ahead of Japan, but behind North Asian economies, China, Korea and Taiwan,” Robert Carnell, ING Bank’s regional head of research in the Asia-Pacific, said.

But Chinese markets underperformed after US President Donald Trump’s threat. Hong Kong’s Hang Seng index eased 0.26% and China’s CSI300 ended flat.

“I told them that they have until September 15th to make a deal. After that, we close it up in this country,” Trump said referring to the ban on TikTok.

TikTok, a platform for creating and sharing short videos, has become a flashpoint for US tensions with China, with the Trump administration citing risks to US security.

The dollar extended gains after the strong US economic data overnight with the unit rising to 92.42 against a basket of currencies and keeping pressure on gold prices, which are down 0.2%.

Asian credit markets are also rallying in sync with other asset classes and the primary issuance pipeline continues to flow. The Asia IG index is 3bps tighter at 57/58. Kaisa Group’s tap of their 2025 bondsChina South City concurrent tender and new bond offerBeijing Infra’s 3 -year bonds, and China Merchant’s green-bond issue are in the market, after Fujian Yango bond’s pricing overnight following oversubscription.

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Asia Stocks

# Japan’s Nikkei 225 index edges up 0.47%

# Australia’s S&P ASX 200 jumped 1.84% 

# Hong Kong’s Hang Seng index eased 0.26%

# China’s CSI300 ended flat

# The MSCI Asia Pacific index advanced 0.47%.

Stock of the day

Logistics service provider YTO Express nearly quadrupled in price rising as much as 277% after Chinese e-commerce giant Alibaba agreed to raise its stake in the company to 22.5% from 10.5%.