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Stocks across Asia kicked off the week with strong gains after soothing Federal Reserve comments and an easing of monetary policy in China triggered a renewed appetite for risk assets. Treasuries steadied after Friday’s slide and oil extended its recent rebound.
Shares in Japan, South Korea and Australia gained and futures pointed to advances for equities in China and Hong Kong. U.S. futures climbed, signaling Friday’s rally in U.S. stocks could continue. Federal Reserve Chairman Jerome Powell said policy is flexible and officials are “listening carefully” to financial markets, while the People’s Bank of China cut the required reserves for banks. Australian bond yields surged after the yield on 10-year Treasuries soared back to 2.67 percent on Friday. Sentiment may also be helped as the U.S. and China reopen trade talks.
“It’s probably an opportunity to buy the dips if you are underweight equity allocations,” Raymond Lee, managing director and portfolio manager at Kapstream Capital, said on Bloomberg TV. “I do think going forward you are probably not likely to see that type of move where equities sell off 20 percent in the space of six weeks, but generally volatility will be higher than what you saw in 2017 and the first half of 2018.”
Powell’s remarks are helping to lift sentiment that’s been hammered as global equities posted their biggest annual loss since the financial crisis, easing concerns the Fed is determined to raise rates even as global economic growth cools and markets tumble. Even after the slump in Treasuries at the end of last week, 10-year yields remain more than 50 basis points lower than where they peaked in November.
A further step by China’s central bank late Friday to secure liquidity to the slowing economy may also help assuage concerns. Apple Inc. last week cut its revenue outlook for the first time in almost two decades, citing weakness in China’s economy as one of the reasons. U.S. and Chinese officials will begin trade negotiations on Monday in the hope of reaching a deal during a 90-day truce between President Donald Trump and his counterpart Xi Jinping.
For more on our markets coverage, you can go to the Markets Live blog.
Here are some events investors may focus on this week:
A U.S. delegation is in Beijing for trade talks with Chinese officials, the first face-to-face encounter since Trump and Xi agreed to a temporary truce on Dec. 1.Wednesday sees the release of minutes from the Fed’s Dec. 18-19 policy meeting. Powell will speak to the Economic Club of Washington D.C. on Thursday. U.K. Parliament resumes a debate on the Brexit withdrawal bill, with Prime Minister Theresa May seeking to avoid defeat in a vote set for the week of Jan. 14.
These are the main moves in markets:
Japan’s Topix index rose 3.3 percent as of 9:11 a.m. in Tokyo. Australia’s S&P/ASX 200 Index gained 1.4 percent.South Korea’s Kospi index added 1.3 percent. Hong Kong’s Hang Seng Index futures rose 1.4 percent. Futures on the S&P 500 gained 0.6 percent. The S&P 500 Index climbed 3.4 percent Friday, when the Dow Jones Industrial Average advanced 3.3 percent.
The yen was steady at 108.48 per dollar. The offshore yuan held at 6.8639 per dollar. The Bloomberg Dollar Spot Index dipped.The euro bought $1.1411, up 0.1 percent.The pound rose 0.1 percent to $1.2734.
The yield on 10-year Treasuries slid one basis point to 2.66 percent.Australia’s 10-year bond yield rose seven basis points to 2.30 percent.
West Texas Intermediate crude climbed 1.9 percent to $48.86 a barrel.Gold was at $1,284.41 an ounce, down 0.1 percent.
–With assistance from Haidi Lun.
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