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Asian shares rose on Monday as investors cheered China’s latest cut to interest rates to bolster its flagging economy and after Wall Street rallied on a robust headline reading for US employment.
China had cut interest rates for the third time in six months on Sunday, and analysts predicted policymakers would relax reserve requirements and cut rates again in the coming months.
Asia-Pacific shares
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3 per cent, moving away from a one-month low touched on Friday. Japan’s Nikkei share average added 1.3 per cent, also moving away from last week’s one-month low.
Chinese shares erased earlier losses and were solidly higher. The CSI300 index of the largest listed companies in Shanghai and Shenzhen was up 1 per cent, while the Shanghai Composite Index was up 1.2 per cent.
The People’s Bank of China has cut its benchmark one-year lending rate by 25 basis points to 5.1 per cent from Monday and its benchmark deposit rate by the same amount to 2.25 per cent.
“The timing of the rate cut is well within expectations, while the depth of the cut is smaller than many had expected,’’ said Zhang Chen, analyst at Shanghai-based hedge fund manger Hongyi Investment.
The easing followed Chinese inflation figures on Saturday that added to concerns about deflationary pressures.
US non-farm payrolls
On Friday, all three major US stock indexes posted gains of over 1 per cent, after US Labour Department data showed non-farm payrolls increased 223,000 last month, while the unemployment rate dropped to a near seven-year low of 5.4 per cent.
The April jobs figures were seen to put the Fed on track for a rate increase as early as September, a Reuters poll found.
Fed rate hike
But US short-term interest-rate futures implied traders don’t expect a Fed rate hike until December at the earliest, based on CME FedWatch, as some people focused on the fact that the previous month’s figures were revised to show a gain of 85,000 jobs instead of the 126,000 previously reported.
“Although April data alone does not guarantee that there won’t be a US rate hike sooner than expected in the coming months, there is a sense of relief for now,’’ said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center.
The mixed report helped lift US Treasury yields. Yield on the benchmark 10-year note stood at 2.138 per cent in Asian trade compared to its US close of 2.15 per cent on Friday.
Dollar vs other currencies
The higher yields gave some support to the dollar, which began the week in its recent ranges. The dollar index, which tracks the US unit against a basket of six major rivals, added 0.3 per cent to 95.108. The dollar was nearly flat on the day against the yen at 119.87, while the euro sagged about 0.4 per cent to $1.1155.
The euro was under pressure after German Chancellor Angela Merkel’s conservatives suffered an election defeat. The Eurosceptic Alternative for Germany (AfD) party was set to win seats in a fifth regional parliament on Sunday in an election in the city-state of Bremen.
Greece crisis, German trade data
Ongoing concerns about Greece’s financial woes as well as disappointing German trade data also undermined the euro.
Later on Monday, the euro group of euro zone finance ministers will meet, and Greece’s government was hopeful that they will note progress on Athens’ talks with lenders. The ministers have ruled out unlocking aid for Greece at the meeting, saying that too many issues with the debt-laden country remain unresolved.
The pound edged down about 0.2 per cent to $1.5420, after it notched a 10-week high of $1.5523 on Friday against the greenback, after a surprise election victory by Conservatives.
Newly re-elected British Prime Minister David Cameron had on Sunday ruled out giving Scotland another independence referendum despite gains by Scottish nationalists in a UK-wide election.
Crude oil
Oil got off to a lacklustre start, with Brent unchanged on the day at $65.39 a barrel after it posted its first weekly loss in a month on Friday as the market fretted again about global oversupply.
US crude was down about 0.2 per cent at $59.29 after rising for an eighth straight week following the US jobs report.
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