Nikkei dived on Monday due to Japan’s interest rate normalisation as regional markets traded firmer following China’s announcement of more stimulus measures, as reported by Reuters.
The Japanese market’s early trading saw a dive of 4.0% as investors anxiously waited for more direction from new Prime Minister Shigeru Ishiba, who has been critical of the Bank of Japan’s easy policies in the past.
However, he sounded more conciliatory over the weekend saying monetary policy “must remain accommodative” given the state of the economy.
In the morning trading session, Shanghai Security Exchange (SSE) Index gained over 100 points, up 3.3%. Hong Kong’s Hang Seng Index gained 241.45 points, up 1.15%.
China’s central bank said it would tell banks to lower mortgage rates for existing home loans by the end of October, likely by 50 basis points on average.
That follows a barrage of monetary, fiscal and liquidity support measures announced last week in Beijing’s biggest stimulus package since the pandemic.
“We believe deflation risks are now being taken more seriously,” said Christian Keller, head of economic research at Barclays. “At the same time, the Politburo suggests a consensus has likely been reached in Beijing that fiscal stimulus and central government leverage are necessary to arrest the downturn.”
Meanwhile, oil prices were erratic as concerns about possible increased supply from Saudi Arabia countered tensions in the Middle East.
Continued Israeli strikes across Lebanon added geopolitical uncertainty to the mix, though oil prices were still weighed down by the risk of increased supply.
Brent fell 1 cent to $71.86 a barrel, while U.S. crude rose 3 cents to $68.21 per barrel.
The week is packed with major U.S. economic data including a payrolls report that could decide whether the Federal Reserve delivers another outsized rate cut in November.
Wall Street also had a rousing week helped by a benign reading on core U.S. inflation on Friday that left the door open to another half-point rate cut from the Fed.
A host of Fed speakers will have their say this week, led by Chair Jerome Powell later on Monday. Also due are data on job openings and private hiring, along with ISM surveys on manufacturing and services.
