Asia: Australian stocks lead region higher

Most Asian equity markets moved into positive territory on Tuesday, as concerns over a slowdown in China abated slightly.

Hong Kong’s Hang Seng Index climbed 0.89%, while the Shanghai Composite Index reversed earlier gains to close down 0.25%.

Despite the decline in Shanghai, China’s markets recouped some of the losses suffered on Monday, when two gauges of manufacturing activity signalled a contraction last month.

Elsewhere, Japanese markets were closed for a bank holiday, while South Korea’s Kospi climbed 0.7% and Australia’s S&P/ASX 200 rose 1.42% to bring a six-day losing streak to an end.

The Reserve Bank of Australia left interest rates unchanged overnight at 2%, which was largely in line with expectations, although there had been some speculation that it may look to cut in the coming months in response to some of the largest banks raising mortgage rates.

“With inflation currently at the lower end of the RBA's target range and policy makers suggesting that the outlook could allow for further easing to support demand, I do see potential for another cut early next year,” said Oanda’s senior market analyst Craig Erlam.

Equities in Australia rose across the board on Tuesday, with a gauge of financial stocks on the S&P/ASX 200 rising 1.6%.

Shares in Australian banks have declined for over a week after some lenders warned future earnings could be negatively impacted by regulations requiring higher capital levels and by an increase in competition.

On the currencies front, the Australia dollar dropped immediately after the RBA’s decision but reversed those losses to gain 0.42% against the US dollar, while the yen slid 0.04% against the greenback.

“With the RBA leaving the door open to further easing and the Fed considering tightening in December, the fundamentals just don’t support such a bullish move and therefore I can’t see it having the support at this stage,” Erlam added.