San Francisco Frontiers - China stimulus hopes help boost stock markets, Fed in focus

With data in recent months showing growth stuttering and business activity slowing, Beijing has come under pressure to provide much-needed support, particularly for the vast property sector.

Despite a series of announcements and minor interest rate cuts, investors have been largely disappointed by the policy response from authorities, with very few concrete measures being unveiled.

However, top leaders on Monday signalled a fresh push to get the post-Covid recovery back on track, particularly the troubled property sector, which accounts for a major part of the world's number-two economy.

After a meeting, the 24-person Politburo recognised "the current economic operation is facing new difficulties and challenges" and agreed they must "implement precise and effective macroeconomic regulation, strengthen countercyclical regulation and policy reserves".

The meeting, headed by President Xi Jinping, also called for efforts to expand domestic consumption and "adjust and optimise real estate policies in a timely manner", according to state broadcaster CCTV.

"The overall stance remains in a pro-growth mindset, but the focus is more forward-looking with an increased emphasis on addressing structural challenges (i.e. local government debt) to facilitate longer-term sustainable growth," said Erin Xin at HSBC.

The announcement "keeps a supportive tone, which can help provide some support for the recovery and it may provide some boost to market sentiment", she added.

While it was nowhere near the blockbuster spending plans seen in the past, the news gave investors a boost, with Hong Kong jumping nearly four percent thanks to a rally in real estate companies and tech giants.

Among the standout performers were developers Country Garden and Sunac, which piled on almost 20 percent each. The two firms are among several struggling under the weight of massive debts that have sent shivers through the industry.

"Investors now believe the Politburo meeting sets an encouraging tone for more substantial and comprehensive policy easing down the road," said SPI Asset Management's Stephen Innes.

"Why is it different this time? Because the lawmakers acknowledged the problem. And to fix any problem, you must acknowledge there is a problem."

And Jizhou Dong, at Nomura Holdings, noted that confidence was lifted by the fact there was no use of the often-repeated message that "housing is for living in but not for speculation", which had been a key part of policy-making since 2016, Bloomberg News said.

Shanghai climbed more than two percent, while Mumbai, Sydney, Seoul, Singapore, Taipei, Manila and Jakarta also rose, though Tokyo and Wellington dipped.

London extended gains at the open, while Paris was also higher, but Frankfurt was in the red.

The prospect of a boost to demand from China's measures also lifted oil prices, with both main contracts jumping more than two percent Monday and extending the gains Tuesday.

However, Kiyong Seong at Societe Generale added: "Overall, the Politburo fell short of so-called 'bazooka stimulus'.

"I don't expect a sustained impact on the market unless there is a series of strong concrete steps."

The advances followed a positive performance on Wall Street, where the Dow chalked up an eleventh-straight gain, its best run since 2017

US markets are enjoying a strong 2023 so far as investors grow increasingly confident the Federal Reserve will make this week's expected rate hike its last, after more than a year of tightening.

Falling inflation and figures suggesting the country's economy remained in rude health have fanned hopes that officials can bring prices under control without causing a recession.

A broadly positive earnings season so far has also lifted spirits on trading floors, while investors will be keeping a close eye on releases this week from Google owner Alphabet, Facebook parent Meta and Microsoft.

The European Central Bank's policy decision is also on hand, with some observers predicting it is close to bringing the curtain down on its own tightening campaign.

Its gathering comes after news that eurozone economic activity shrank at its fastest rate for eight months in July owing to cuts in manufacturing.

- Key figures around 0715 GMT -

Tokyo - Nikkei 225: DOWN 0.1 percent at 32,682.51 (close)

Hong Kong - Hang Seng Index: UP 3.9 percent at 19,393.51

Shanghai - Composite: UP 2.1 percent at 3,231.52 (close)

London - FTSE 100: UP 0.3 percent at 7,698.95

Euro/dollar: UP at $1.1081 from $1.1067 on Monday

Pound/dollar: UP at $1.2844 from $1.2821

Euro/pound: DOWN at 86.26 pence from 86.29 pence

Dollar/yen: DOWN at 141.42 yen from 141.51 yen

West Texas Intermediate: UP 0.2 percent at $78.80 per barrel

Brent North Sea crude: UP 0.1 percent at $82.85 per barrel

New York - Dow: UP 0.5 percent at 35,411.24 (close)

P.Thomas--SFF