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Asia stocks up as China hints easing of monetary policy

Asia stocks

Nikkei 225 jumped 1.12%, ASX 200 was up 0.45%, Hang Seng Index was up 0.31%, Shanghai Composite gained 0.66% and the Shenzhen Component was up 0.35%

Asia Pacific stocks were mostly up on Thursday morning, as China hinted that it would loosen monetary policy further and the bond market dialled back bets on aggressive interest rate hikes from the U.S. Federal Reserve.

Japan’s Nikkei 225 jumped 1.12% by 3:08 AM GMT while South Korea’s KOSPI inched down 0.05%

In Australia, the ASX 200 was up 0.45%, with employment data showing that the employment change was 17,900, the full employment change was 20,500, and the unemployment rate was 4% in March 2022.

Hong Kong’s Hang Seng Index was up 0.31%.

China’s Shanghai Composite gained 0.66% and the Shenzhen Component was up 0.35%.

The People’s Bank of China is expected to cut the one-year policy loans interest rate on Friday, the second time it would be doing so in 2022 to date. The central bank could also lower the reserve requirement ratio soon, as the lockdowns to curb the country’s latest COVID-19 outbreak impact the economy.

An upward trend in shorter maturity U.S. Treasuries could also indicate that investors are readjusting their bets on how fast the Fed will tighten monetary policy. Tuesday’s consumer price index data spurred cautious optimism that inflation is peaking, although producer price index (PPI) data released a day later reminded investors not to jump too quickly to conclusions.

The PPI rose 11.2% year-on-year and 1.4% month-on-month, while the core PPI rose 9.2% year-on-year and 1% month-on-month, in March.

Oil traded near the $104 mark as concerns about tight supply continue. Commodity-driven inflation, exacerbated by the war in Ukraine precipitated by Russia’s invasion on Feb. 24, continues to impact the economy and investor sentiment.

Inflation and the conflict were creating ‘significant’ challenges, according to JPMorgan Chase & Co. CEO Jamie Dimon, with the firm among the first big U.S. banks reporting earnings for the first quarter of 2022.

‘Fed rate hike expectations will get tested in the coming months’ partly on geopolitical risks, OANDA senior market analyst Ed Moya said in a note.

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