Global Stocks Tick Higher on China Stimulus

Date : 09/09/2019 @ 10:49AM
Source : Dow Jones News
Stock : Air France KLM (AF)
Quote : 10.57  0.25 (2.42%) @ 4:40PM
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Global Stocks Tick Higher on China Stimulus

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By Caitlin Ostroff and Joanne Chiu 

-- U.S. stock futures up

-- Government bond yields rise

-- Asian, European stocks tick higher

Global markets edged up Monday after China late Friday undertook stimulus measures as data showed its economy has been pressured by trade tensions with the U.S.

China's central bank cut lenders' reserve requirement ratios, a move that could free up 900 billion yuan ($126 billion) to finance projects that might spur construction and sustain employment.

The gains in mainland Chinese stocks were capped, however, as the weak trade data offset the stimulus measures. The Shanghai Composite Index stood 0.8% higher by midafternoon.

Elsewhere in the region, Japan's Nikkei 225 rose about 0.5%, while Hong Kong's Hang Seng Index and Australia's S&P/ASX 200 were little changed.

Futures for the S&P 500 were up 0.3%. The contracts don't necessarily predict market moves after the opening bell.

In Europe, the Stoxx Europe 600 edged up 0.1%, with Germany's DAX up 0.3% and the U.K.'s FTSE 100 down 0.3%.

Shares of Air France-KLM slid 8.4% after the airline warned of weaker-than-forecasted bookings. Shares of Associated British Foods ticked down 3% after the company said its adjusted earnings-per-share is expected to be in line with last year.

Market-friendly developments -- including the Chinese stimulus, new U.K. legislation aimed at preventing a no-deal Brexit and better-than-expected German export figures for July -- were tempered by poor Chinese export data and U.S.-China trade tensions, said Craig Erlam, a senior market analyst for foreign exchange brokerage Oanda.

"When you consider the whole package of things, it's a little bit neutral," he said of the market. "We're treading water."

U.S. stocks Friday also posted small gains following a weaker-than-expected jobs report that lifted investor hopes for an interest-rate cut from the Federal Reserve.

Data released at the weekend showed that Chinese imports fell for a fourth- straight month in August, as a drop-off in exports to the U.S. steepened, highlighting the impact of the two countries' prolonged trade spat. Economists believe that China's economy isn't tanking, but it is almost certainly weaker than official reports suggest.

Larry Hu, China economist at Macquarie Group, said the central bank move was "too little, too late." The lower reserve requirements would have a limited impact on the economy and policy makers are set to do more in the coming months, he said in a note.

Still, the move seems to have brought optimism to investors. "The People's Bank of China's determination to fight the economic slowdown encouraged investors to buy stocks on Monday open, but gains remained timid," said Ipek Ozkardeskaya, a senior analyst at London Capital Group.

The yield on 10-year U.S. Treasurys rose to 1.601%, from 1.552% on Friday. Yields rise when prices fall.

European government bond yields rose across the board. The Italian 10-year yield rose to 0.943% from 0.885% Friday. The German 10-year bund was yielding minus 0.596%, up from minus 0.634% before the weekend.

The falling yields came amid expectations for a cut in interest rates by both the Federal Reserve and the European Central Bank this month, said David Cheetham, chief market analyst for online foreign-exchange brokerage XTB.

The expected depth of those cuts was reigned in by Fed Chairman Jerome Powell, and the market is now adjusting its expectations from larger cuts previously priced in, Mr. Cheetham said. He expects the Fed to cut by 25 basis points and the ECB to cut by 10 basis points.

"We've seen a strong move lower on this expectation on stimulus measures, and now the markets doing a wait and see," he said.

In currencies, the British pound was up 0.5% against the U.S. dollar at $1.2293. The pound last week fell briefly below $1.20 amid U.K. political turbulence, before recovering slightly amid signs that a no-deal Brexit may be avoided. The queen is expected to sign a bill that would prevent Prime Minister Boris Johnson from pursuing a break from the European Union without a deal in place.

In commodities, Brent crude oil rose 0.8% to $62.02 a barrel after Saudi crown prince Mohammed bin Salman appointed Prince Abdulaziz bin Salman, an experienced oil official and son of the country's king, as head of the powerful energy ministry. Prince Abdulaziz is expected to continue OPEC's efforts to bolster energy prices by cutting production.

Phillip Waller contributed to this article.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Joanne Chiu at joanne.chiu@wsj.com

 

(END) Dow Jones Newswires

September 09, 2019 06:34 ET (10:34 GMT)

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