Risk sentiment was constructive globally, as Wednesday found European equities looking for a third daily gain, while shares in Asia advanced.
Both Hong Kong and mainland stocks were sharply higher a day on from “bubble” warnings out of Beijing.
It was the best day for mainland shares since prior to the holiday and the best day for city shares since January. Hong Kong shares are a see-saw. It’s been down one day, up the next since midway through last month. Bloomberg’s Wes Goodman noted that 79% of index components trade above their 200-day moving average. “That’s more than Japan’s Topix, though less than the Nikkei,” he said. “It also beats the benchmarks for South Korea, Australia, China and H shares.”
It helped that the China Securities Journal suggested the PBoC may slash RRR for some lenders later this month. That, even as the market had become convinced recently that monetary policy in China was a one-way ticket to tighter.
“[That] seems to have reversed the markets’ ills and dollar bids from [Tuesday] when the PBoC hinted at tightening,” AxiCorp’s Stephen Innes remarked. Still, Chinese shares are down more than 6% since coming back from the Lunar New Year.
In Europe, final services and composite PMIs for February were generally a bit better than the flash reads, with the exception of Germany. The Eurozone composite was 48.8 in the final print. The services PMI likewise remained in contraction territory.
Obviously, activity in Europe is subdued compared to the US. The divide is readily apparent in IHS Markit’s services gauges (figure above).
Meanwhile, Down Under, Australia’s economy was buoyant headed into 2021. Output grew 3.1% in the fourth quarter, the country said Wednesday. In the third quarter, growth was an upwardly revised 3.4%. As Bloomberg noted, “that was the first back-to-back expansions above 3% since quarterly records were established in 1959.”
This makes for an amusing (or vexing, depending on how you look at it) juxtaposition with the RBA’s insistence on keeping policy ultra-accommodative.
“Strong and broad-based recovery may call for an early normalization of monetary policy, while the current financial market situation may call for further monetary easing to lower bond yields and weaken the Aussie,” SocGen’s Suktae Oh said. “Policymakers’ dilemma will continue, and we maintain our forecast of no changes in monetary policy throughout this year except for the tapering of QE program.”
