By Emma O’Brien and Nick Gentle
Asian stocks rose, halting the regional index’s longest slump in 12 years, while industrial metals climbed and Chinese bonds rallied as the country’s central bank boosted stimulus. The dollar rose before the Federal Reserve reviews interest rates.
The MSCI Asia Pacific Index added 0.3 percent by 1:28 p.m. in Tokyo, rising for the first time in 10 days as a gauge of Chinese shares in Hong Kong jumped 1.7 percent. China’s five-year bonds gained the most in three months and the cost of insuring Asian debt against default slid a second day. Copper and nickel advanced at least 0.5 percent in London. Standard & Poor’s 500 Index futures retreated 0.1 percent and the Bloomberg Dollar Spot Index climbed 0.1 percent after its biggest drop in three months yesterday.
China is injecting 500 billion yuan ($81 billion) into the nation’s largest banks, according to a government official familiar with the matter, signaling the deepest concern yet with the country’s economic slowdown. Speculation the Fed will today maintain its pledge to keep rates low for a “considerable time” after ending asset purchases helped send the dollar lower yesterday. The euro-area and U.S. report inflation today, while Thailand reviews its key rates.
China’s “authorities want to make sure they will achieve minimum, acceptable growth by providing more liquidity to banks, and I think the market will view that positively,” Tim Schroeders, a portfolio manager who helps oversee $1 billion in equities at Pengana Capital Ltd. in Melbourne, said by phone. “Given the weak data, particularly over the weekend, some sort of stimulus measures were in the wind, but to see this occur overnight, I’d say it’s still a surprise to the market.”
Hong Kong’s Hang Seng Index advanced 1.1 percent for its first gain in nine days, while the Hang Seng China Enterprises Index is rebounding after its biggest five-day retreat since a credit crunch in June last year. The Shanghai Composite Index (SHCOMP) slipped 0.2 percent after its biggest drop in six months yesterday.
The People’s Bank of China will funnel 100 billion yuan each to the five biggest banks for a three-month period, said the official, who asked not to be identified because the measure hasn’t been formally announced. The credit expansion builds on targeted measures to shore up growth while stopping short of broad-based monetary and fiscal stimulus that increases dangers from bad loans.
China joins the European Central Bank in adding liquidity, while the U.S. scales back stimulus. Data at the weekend showed Chinese factory output grew at the slowest pace since the global financial crisis and retail sales expanded less than expected.
One-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, declined as much as seven basis points to a three-month low of 3.46 percent in Shanghai, data compiled by Bloomberg show. The yield on government debt due April 2019 climbed four basis points, the most since June 10, and the yuan gained for the first time in five days.
The PBOC’s lending facility “will iron out the short-term bumps in liquidity,” Hao Hong, a Hong Kong-based strategist at Bocom International Holdings Co., said in a phone interview. “There is a need for liquidity injections because there are IPOs coming up that can tie up 800 billion to 1 trillion yuan at a time. Plus you have cash demand for the Golden Week holiday and quarter-end demand from banks to meet regulatory requirements.”
Australia’s S&P/ASX 200 Index (AS51) slipped 0.7 percent, while the local dollar weakened 0.3 percent to 90.71 U.S. cents after surging 0.7 percent on the China-stimulus report. Japan’s Nikkei 225 Stock Average climbed 0.1 percent after dropping for the first time since Sept. 5 yesterday, while the broader Topix index was little changed.
Copper for three-month delivery on the London Metal Exchange rose to $6,936 a metric ton, after adding 1.2 percent yesterday. Nickel climbed 0.9 percent to $18,259 a ton, headed for its steepest one-day gain since Sept. 8. Aluminum, zinc and lead all rose at least 0.3 percent. China is the biggest consumer of industrial metals.
The won appreciated 0.3 percent to 1,033.80 per dollar, while the ringgit gained 0.3 percent from its closing level Sept. 15 as markets in Kuala Lumpur opened after a holiday. Malaysian inflation probably held at 3.2 percent in August from a year earlier, unchanged from July, according to economists surveyed by Bloomberg.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose after slipping as much as 0.5 percent last session, its biggest intraday drop since May.
Wall Street Journal reporter Jon Hilsenrath said in a Web video that he thinks Fed policy makers will maintain their pledge to keep benchmark overnight rates low for a “considerable time” after the bank ends its asset purchases known as quantitative easing.
A Bloomberg News survey of economists published yesterday was almost evenly divided on whether the Fed will retain the reference to rates staying low for a “considerable time” today. Fifty three percent said the phrase would stay in the Fed’s statement. Fed Chair Janet Yellen will speak to reporters after the release.
The pound was little changed at $1.6286 after yesterday’s 0.3 percent advance. The Bank of England releases minutes of its last meeting today and Scotland will vote tomorrow on whether to break from the U.K.
West Texas Intermediate crude oil was little changed at $94.91 a barrel today after jumping 2.1 percent last session to $94.88, its highest settlement price since Sept. 3. Brent crude fell 0.1 percent to $98.98 a barrel.
The Organization of Petroleum Exporting Countries’ production quota could fall 500,000 barrels a day to 29.5 million barrels a day next year, Secretary General Abdalla El-Badri said yesterday. He was speaking at OPEC’s secretariat in Vienna after talks with Russian Energy Minister Alexander Novak.
A report from the Energy Information Administration today is projected to show U.S. crude supplies dropped last week, according to analysts surveyed by Bloomberg.
To contact the editors responsible for this story: Nick Gentle at [email protected] Ramsey Al-Rikabi