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Asian shares hit two-week high on Fed pause bets, China boost

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SINGAPORE : Asian equities rose on Wednesday and the dollar wobbled as weak U.S. labour data bolstered bets that the Federal Reserve was likely done with its interest rate hikes, while beaten-down China stocks rose for a third straight day.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.86 per cent to a two-week top and is on a three-day winning streak. The index though is down 6 per cent in August and set for its worst monthly performance since February.

Japan’s Nikkei was up 0.5 per cent, while the Australia’s S&P/ASX 200 index rose 0.64 per cent.

China shares have gained this week following the announcement of measures to lift investor confidence, including halving the stock trading stamp duty, loosening margin loan rules, and putting the brakes on new listings.
In early trading, the blue-chip CSI 300 Index was 0.3 per cent higher, while Hong Kong’s Hang Seng Index rose 0.75 per cent.

Analysts though see a need for more action from Chinese authorities to sustain the rally.
“It will take more resolute policy measures and a sustainable recovery in earnings in order for the rally to last,” Carlos Casanova, senior economist for Asia at UBP, said. Investors’ focus will be on PMI data from China later this week that will highlight the state of the economy.

Overnight, Wall Street ended sharply higher, while Treasury yields slid to three-week lows after data showed U.S. job openings dropped to the lowest level in nearly 2-1/2 years in July, signalling easing labour market pressures.

“‘Bad news is good news,’ as
the data supported bets for a sooner end of the Fed’s hiking cycle despite the recent hawkish rhetoric of Fed Chair Powell,” Tina Teng, markets analyst at CMC Markets, said in a note.

With the Fed highlighting that the interest rate path will be heavily dependent on data, traders are tweaking their bets based on the latest indicators. Source: Reuters

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