World stocks rallied on Monday, with sentiment supported by China’s efforts to shore up its battered markets and lift confidence towards the world’s No.2 economy.
The dollar was broadly firm, touching a fresh high against the battered yen.
Europe’s broad STOXX 600 index hit a two-week high, a day after posting its biggest one-day jump in about a month on China hopes. London’s blue-chip FTSE rallied 1.5%, playing catch-up after Monday’s UK public holiday.
U.S. stock futures, however, were mostly steady, suggesting some caution heading into the Wall Street open , .
All this followed a 1% gain in MSCI’s broadest index of Asia-Pacific shares outside Japan and a 2% rally in Hong Kong stocks.
Beijing at the weekend introduced a slew of measures to shore up the market, such as halving stock trading stamp duty, loosening margin loan rules and putting the brakes on new listings.
This has offered some respite to equity markets, rattled this month by fresh strain in China’s property market and renewed selling in the U.S. Treasury market.
Latest news however suggested China would remain a source of global market volatility.
China’s largest private property developer Country Garden Holdings is seeking to add a 40-day grace period for the repayment of a 3.9 billion yuan ($535.3 million) private onshore bond due on Saturday, a document seen by Reuters showed.
And pressure remained on China Evergrande. The builder which once traded above HK$30 a share, fell 10% to HK$0.31 in its second session back from suspension, highlighting the heavy doubts that remain over the country’s debt-stricken property sector.
“September will reveal the true underlying sentiment in markets,” said Nordea chief markets strategist Jan von Gerich.
“There has been an initial jump in markets but these are still fine tuning measures and won’t satisfy expectations for something bigger in terms of stimulus.”
BIG WEEK
Attention turned to key monthly U.S. jobs data released at the end of the week. Job openings figures are due later on Tuesday and may offer some clues.
Speaking at last week’s Federal Reserve annual symposium at Jackson Hole, Fed chief Jerome Powell said the U.S. central bank may need to raise rates further to ensure inflation is contained.
“The message from Powell was that they are in data dependent mode and that puts more focus on the U.S. numbers this week, particularly PCE deflator and payrolls,” said Lee Hardman, senior currency analyst at MUFG.
Ten-year U.S. Treasury yields are up 23 basis points this month and set for their biggest monthly jump since February as investors positioned for a higher for longer rates scenario.
On Tuesday, 10-year yields drifted back up and were last trading flat on the day at 4.20% , having traded lower earlier in Europe. Two-year yields were also flat, trading at around 5% .
In currency markets, the dollar was broadly firm against other major currencies.
The euro was down 0.1% at around $1.0804 and heading back towards 2-1/2 month lows hit last week.
The dollar rose to 146.30 yen, its highest level since November.
Traders are wary that its weakness might soon prompt government intervention, and earlier in Asia, the currency was barely moved by a government report suggesting an inflection point in the country’s years-long battle with deflation.
In commodities, Brent crude futures were 0.8% firmer $85.06 a barrel.
European gas prices fell 5%, hurt by a deepening standoff over pay and conditions at Australian gas rigs, with workers planning stoppages from next week. Benchmark Dutch prices are up 32% for August so far.
