Asia Stocks Rise on China's Market Support, Caution Ahead of U.S. Data

Asian stocks edged higher on Monday following China's announcement of new measures to support its struggling markets, though caution prevailed as upcoming U.S. job and inflation data could impact the trajectory of interest rates. While China's decision to cut stamp duty on stock trading aimed to bolster investor confidence amidst a 6.7% decline in industrial profits for July. Chinese blue-chip stocks slid 2% the previous week, reaching their lowest point for the year, setting the stage for heightened anticipation of August's official PMI data.

China Evergrande Group, the most indebted property developer globally, reported a narrower net loss for the first half of 2023 due to increased revenue. Evergrande's financial challenges epitomized China's property crisis, characterized by defaults, unfinished homes, and consumer skepticism. Amid concerns over contagion, missed U.S. dollar coupon payments by Country Garden, China's largest private developer, raised alarms, amplifying the strain on the economy already plagued by weak domestic and foreign demand and rising unemployment.

In a bid to make mortgages more affordable and rekindle property demand, Chinese banks were expected to reduce deposit rates. This move would provide banks with flexibility to lower mortgage rates and enhance profitability.

Asia-Pacific shares outside Japan increased by 0.2%, signaling a possible rebound after a three-week decline. Federal Reserve Chair Jerome Powell's slightly hawkish stance did not significantly deter the market. While Powell indicated potential rate hikes, he emphasized a cautious approach, considering data trends and inflation targets. The likelihood of a steady outcome at the September 20 meeting was approximately 80%, with a 54% probability of a year-end rate hike. The market's direction hinged on U.S. data flow, which, after strong indicators, was tempered by recent manufacturing survey results indicating a slowdown.

Bank of Japan Governor Kazuo Ueda diverged from the global tone, underscoring the need for maintaining loose monetary policy. Despite Japan's core consumer inflation exceeding 2% for 16 consecutive months, Ueda noted the influence of cost-push factors. However, he acknowledged the anticipation of declining inflation trends.

Meanwhile, India faced rising food price inflation due to erratic rainfall, compelling the government to explore solutions to mitigate inflationary pressures. Annual retail inflation reached 7.44% in July, with food price inflation at 11.5%, necessitating measures to avoid backlash ahead of upcoming elections. The government considered extending a free food program for low-income consumers to alleviate hardships.

In the week's Asian economic calendar, PMI reports from various countries, including China, would provide insights into August's economic activity. India's GDP data and inflation figures from Indonesia and Vietnam were also anticipated. China's services and manufacturing PMIs held particular significance, as investors and policymakers sought signs of economic recovery, although forecasts predicted continued weakness. Consequently, the general trajectory of Asian stock markets remains relatively subdued due to the possibility of extended contraction in the Chinese economy. Meanwhile, the Japanese stock market is anticipated to find stability in a modest uptrend with a minor decline.

Data for Technical Analysis (5H) CFD JP225 Nikkei 225 Futures - Sep 23

Resistance : 32134.3, 32195.7, 32295.0

Support : 31935.7, 31874.3, 31775.0                     

5H Outlook

Source: Investing.com                      

Buy/Long 1 If the support at the price range 31810.7 - 31935.7 is touched, but the support at 31935.7 cannot be broken, the TP may be set around 32207.5 and the SL around 31750.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 32134.3 - 32259.3, TP may be set around 32295.0 and SL around 31875.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 32134.3 - 32259.3 is touched, but the resistance 32134.3 cannot be broken, the TP may be set around 31947.5 and the SL around 32319.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 31810.7 - 31935.7, TP may be set around 31775.0 and SL around 32194.0, or up to the risk appetite.       

Pivot Points Aug 28, 2023 02:44AM GMT

Sources: Investing 1, Investing 2