Asian stocks surged for the second consecutive day on Wednesday as China’s expansive stimulus measures lifted equities and strengthened the yuan.
Chinese shares extended their gains after the People’s Bank of China unveiled significant steps on Tuesday to bolster the country’s economy and financial markets.
By 1:15 pm AEST (3:15 am GMT) the CSI 300 Index added 2.2%, and the Hang Seng Index gained 4.3%. Meanwhile, the offshore yuan strengthened past 7 for the first time since May 2023.
The upward momentum was seen across equities and currencies as market participants cheered last week’s major rate cut by the U.S. Federal Reserve.
China’s stimulus measures provided an additional boost, pushing regional indices to their highest levels since February 2022. Emerging Asian currencies, including the Malaysian ringgit and Thai baht, also jumped in response.
Adding to market enthusiasm, the People’s Bank of China reduced its one-year medium-term lending facility rate from 2.3% to 2%, further supporting equities.
Despite these positive developments, the scale of challenges facing China’s economy suggests that the stimulus measures may only provide temporary relief. While the U.S. dollar index dropped to near its lowest level this year, emerging market currencies set new highs.
In the U.S., a report from the Conference Board showed a sharp drop in consumer confidence, the largest since August 2021. Concerns over a cooling labor market and weaker-than-expected manufacturing data also weighed on sentiment.
Traders have increased bets on further U.S. Federal Reserve policy easing, with markets pricing in more than three-quarters of a percentage point in rate cuts by year-end.
Investors are now awaiting key U.S. data on personal consumption expenditures and spending for further signals on the Fed's future policy direction.
