Asian Stocks Surge on Positive China News Amid U.S. Election Uncertainty
Chinese equity benchmarks led the gains, climbing nearly 2%. Following a public holiday, Japan’s Nikkei 225 index experienced a notable bounce back, while Australian and South Korean stocks faced slight declines. The Bloomberg Dollar Spot Index remained unchanged, and the yield on 10-year Treasuries rose by a basis point.
The day began cautiously; however, the release of data indicating that China’s service sector activity grew at its fastest pace since July, alongside comments from the Prime Minister suggesting ample policy space, sparked enthusiasm in the markets. Investor sentiment was further supported by discussions within China’s top legislative body regarding proposals aimed at alleviating the financial burdens on local governments.
This week, all eyes are on the upcoming U.S. presidential election, with polls indicating a tight race between Donald Trump and Kamala Harris. The potential for a contested outcome could lead to prolonged vote counting, raising concerns about market volatility.
James Sullivan, head of APAC equity research at JPMorgan, remarked, “It’s entirely reasonable for the Chinese government to keep some of its stimulus powder dry in the hopes of understanding what’s going to happen out of the United States.” He added, “The cost of a Trump victory is far greater than a Harris win.”
Market participants can expect additional catalysts throughout the week. On Thursday, the Federal Reserve is set to announce its latest decisions on interest rates, accompanied by a press conference from Jerome Powell, where he will outline the central bank’s path forward.
Chris Weston, head of research at Pepperstone Group, stated, “The U.S. dollar probably serves as the clearest expression of the week’s developments.” He noted that a Harris victory in a divided Congress could warrant selling pressure on the dollar, while “if Trump wins, you might see a brief bounce in the dollar of 1% or 2% within a day or two.”
In other news, Australia’s central bank kept its key interest rate steady at 4.35%, as anticipated, resulting in a limited market response. The board highlighted “high levels of uncertainty” regarding the international outlook.
As developments unfold, market participants remain vigilant, with expectations of volatility as election day draws closer.
