Asian stocks edged higher on Monday as China’s week-end interest rate cut partially offset soft US data, while the dollar hit an 11-year high against a basket of currencies.
China had on Saturday stepped up its easing tempo and cut its lending and deposit rates as the world’s second largest economy tries to ward off deflation.
Australian shares posted some of the biggest gains in Asia following the China rate cut, gaining 0.6 per cent after touching a seven-year peak as resource shares surged.
But the impact from the week-end easing was limited on the region’s overall markets.
Asia-Pacific shares
MSCI’s broadest index of Asia-Pacific shares outside Japan rose a modest 0.1 per cent. Tokyo’s Nikkei crawled up 0.3 per cent. The Shanghai Composite Index edged up 0.3 per cent, while Malaysian and Thai shares slipped.
While the previous rate cut in late November triggered a 26 per cent surge in Chinese shares over the following month, investors appeared less excited this time around.
“It’s not a surprise,’’ said Wu Kan, head of equity trading at investment firm Shanshan Finance in Shanghai. “It’s a slow bull (market) now, not the kind of crazy bull we saw last year.’’
The Aussie, a proxy of China growth-related trades, climbed to $0.7850 early in the session before impact from the China rate cut faded and was last trading at $0.7767, down 0.6 per cent.
“In some senses this rate cut is a technical response to the fact that lower inflation is making real borrowing costs more expensive in China,’’ said Ric Spooner, chief market analyst at CMC Markets in Sydney.
US GDP data
Equity markets were also cautious after revised data on Friday showed US gross domestic product expanded at a slower pace in the fourth quarter than initially thought, and the University of Michigan’s final February reading on US consumer sentiment slipped from an 11-year high but topped expectations.
Spreadbetters expected a mixed open for European bourses, forecasting Britain’s FTSE and France’s CAC to open a touch lower but calling for Germany’s DAX to start slightly higher.
In currencies, China’s yuan fell to its lowest level against the dollar since October 2012 after the country’s central bank cut rates.
The dollar was up 0.2 per cent at 119.88 yen after rising to a three-week high of 119.955. It gained about 0.6 per cent last week when upbeat US data helped revive the prospects of an early interest rate increase by the Federal Reserve.
The euro hovered near a five-week low of $1.1160. The greenback’s broad strength helped the dollar index rise to as high as 95.505, a peak not seen since September 2003.
EC B bond-buying programme
In addition to the all-important US non-farm payrolls data on Friday, the key focus this week will be the European Central Bank (ECB) meeting on Thursday. Investors keenly await further details on its €1 trillion ($1.1 trillion) government bond-buying programme, which begins this month.
Crude oil
US crude fell 36 cents to $49.40 a barrel after Friday’s $1.59 surge petered out. Last month, US crude posted the first monthly gain since June thanks to an improving demand outlook and supply outages.
Three-month copper on the London Metal Exchange hovered within distance of a two-month high of $5,944 a tonne struck last week as China’s rate cut fed hopes of increased demand from the metal’s top user.