SYDNEY : Asian markets held their breath on Monday as investors waited to see how serious Beijing was about policy easing via widely expected rate cuts, having so far sorely disappointed with its stimulus steps.
China is expected to cut lending benchmarks by between 10 and 15 basis points on Monday, with many analysts predicting a big reduction to the mortgage reference rate to revive credit demand and shore up the ailing property sector.
The central bank on Sunday said Beijing would coordinate financial support to resolve local government debt problems, and there have been reports it was encouraging commercials banks to lend more.
S&P 500 futures were 0.1 per cent firmer, while Nasdaq futures added 0.2 per cent. Earnings from AI-darling Nvidia on Wednesday will be a major test of valuations.
Analysts are concerned the market has got too long, especially of tech, leaving it vulnerable to a deeper pullback.
BofA’s latest survey of fund managers found sentiment was the least bearish since February 2022, while cash levels were at nearly a two-year low, and 3 out of 4 surveyed expect a soft landing or no landing for the
global economy.
Analysts at Goldman Sachs, meanwhile, argue there is still scope for investors to add to equity positions.
“The re-opening of the buy-back blackout window will provide a boost to equity demand in coming weeks although a flurry of expected equity issuance this fall may provide a partial offset,” they wrote in a note.
Stock valuations have been pressured in part by a sharp rise in bond yields, with the U.S. 10-year hitting 10-month highs last week at 4.328 per cent.
Early Monday, yields were holding at 4.253 per cent and a break above 4.338 per cent would take them to levels not seen since 2007.
Markets assume Federal Reserve Chair Jerome Powell will note the jump in yields at the Jackson Hole conference this week, and the recent run of strong economic data. The Atlanta Fed’s GDP Now tracker is running at a heady 5.8 per cent for this quarter. Source: Reuter
