Global stocks scaled five-week highs on Monday on hopes that more government stimulus was coming and the world economy was on the mend, while the Chinese yuan retreated from a 17-month high after a policy move over the weekend.
China’s September trade data is the major release during the day session in Asia – tonight sees the International Monetary Fund update its World Economic Outlook, the start of the two day Prime sale from Amazon, and the release of new iPhones from Apple Wednesday morning, Sydney time.
MSCI’s gauge of stocks across the globe climbed 1.23%, while European stocks rose 0.72%.
The Dow rose 250.62 points, or 0.88%, to 28,837.52, the S&P 500 added 57.09 points, or 1.64%, to 3,534.22 and the Nasdaq ended up 296.32 points, or 2.56%, to 11,876.26.
That saw the overnight futures trading for the ASX 200 gain 48 points by just after 7 am.
Oil fell sharply as more production returned from the previously shut down Gulf fields and resumed flowing from Libya and continued from Norwegian felds that were under threat last week from a now settled industrial dispute.
US investors are still optimistic that the Republicans and Donald Trump will work through talks that have repeatedly stalled to deliver another round of fiscal stimulus before the November 3 election.
But political analysts say that while Trump will promise much, the opposition in the Senate from conservative Republican senators will see any measure blocked.
Investors are also hoping that the US five major banks, led by JPMorgan and Bank of America will announce better than forecast third-quarter earnings starting tomorrow that show business activity was not as weak as feared also helped.
Apple shares rose ahead of the release tomorrow morning (Sydney time) of the new range of 5G enabled iPhones, while Amazon shares were also solid a day before the start of its two-day Prime Day sale.
Earlier, Chinese stocks dragged Asian markets higher on Monday as investors bet on a steady recovery for the world’s second-biggest economy, with important trade data for September out later today and expected to be solid.
Imports and export figures for the quarter and the first 9 months of the year will also be available.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1% to 2-1/2-year highs, buoyed by a 2.4% gain in Chinese blue chips and a 2% rise for Hong Kong’s Hang Seng index. Japan’s Nikkei eased 0.3% and the ASX 200 in Australia closed up 29 points or 0.49%.
Despite this optimism, investors are ignoring the fallout from tonight’s update of its World Economic Outlook (WEO) from the International Monetary Fund (IMF).
Thanks to the rising toll of new infections and deaths across Europe, the US, and some Nordic countries (but not in Asia, so far), the IMF is considered likely to downgrade its 5.4% growth rate estimate for 2021.
GDP estimates for the rest of 2020 and 2021 will be cut for Europe because of the rising tide of infections.
Reuters said the Chinese yuan fell 0.8% after falling overnight in Asia from its 17 month high on Friday, after the Peoples Bank of China cut foreign exchange forward reserve requirements that effectively lowers the cost of shorting the yuan.
That indicates the Chinese authorities have reached the limit of their tolerance for the rising value of the currency and want it to ease back (ignoring the fact that the central bank guided it higher after the 8 day Golden Week holiday).
Making it cheaper to short the currency will allow the central bank to oversee market players capping the currency’s rise and not the central bank.
The US dollar was slightly easier overall but the Aussie trended lower to trade just over 72 US cents in early Asian dealings on Tuesday.
