Asia report: Markets move higher on prospect of stimulus measures

In Japan, the Nikkei 225 was up 0.71% at 20,563.16, as the yen weakened 0.18% against the dollar to last trade at JPY 106.57.

Of the major components on the benchmark index, automation specialist Fanuc was up 0.47%, fashion firm Fast Retailing added 0.83%, and technology conglomerate SoftBank Group was 1.69% stronger.

Convenience store operator FamilyMart was a big winner, with its shares surging 8.73%.

The broader Topix index was 0.61% higher in Tokyo, closing its trading session at 1,494.33.

On the mainland, the Shanghai Composite was 2.1% firmer at 2,883.10, and the smaller, technology-heavy Shenzhen Composite was 3.05% higher at 1,571.97.

Markets watchers were reacting to the People’s Bank of China’s announcement on Saturday that it would improve its mechanism to set its prime loan rate from this month.

The central bank said the changes would let it “use market-based reform methods” to help bring real lending rates down in the country.

Beijing has announced a number of attempts to underpin the country’s economy in recent months, as it struggles amid an ongoing trade war with the United States.

South Korea’s Kospi was ahead 0.66% at 1,939.90, while the Hang Seng Index in Hong Kong was 2.17% stronger at 26,291.84.

Hong Kong’s primary airline Cathay Pacific was 0.94% higher after its chief executive officer resigned on Friday, citing “recent events”.

The airline had come under pressure from mainland China after its chief said it was not the airline’s business to dictate the political views of its staff, with two of its pilots found to be involved in ongoing pro-democracy protests in the special administrative region.

Both of the blue-chip technology stocks were weaker in Seoul, with Samsung Electronics losing 0.68% and chipmaker SK Hynix down 1.7%.

US Treasury bond yields bounced after the close of Asia markets on Friday, following reports that Germany was looking to boost its spending through the issue of more debt.

It came after the yield on the 10-year Treasury note briefly broke below the rate for the two-year bond on Wednesday last week in a ‘yield curve inversion’ - a phenomenon seen by many in the US as a signal of an impending recession.

“Asian markets moved higher following a strong close on Wall Street on Friday and after positive comments from President Trump regarding the trade dispute over the weekend,” said London Capital Group head of research Jasper Lawler.

“The fact that Trump and China are still talking is offering some optimism to the markets, even if the US isn’t ready for a deal right now.”

Lawler said growing expectations for stimulus measures from various countries was “going a long way” to boost sentiment.

“A move unveiled by China to reduce borrowing costs for companies to prop up slowing growth, the promise of more spending by Germany in the case of a recession and the prospect of fresh tax cuts in the US are helping boost the mood on Monday.”

Oil prices were higher as the region went to bed, with Brent crude last up 0.91% at $59.18 per barrel, and West Texas Intermediate advancing 1.19% to $55.53.

In Australia, the S&P/ASX 200 managed gains of 0.97% to end its trading session at 6,467.40, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was ahead 0.4% at 10,702.48.

Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.07% at AUD 1.4759, and the Kiwi retreating 0.19% to NZD 1.5584.