Asian stocks edge up as weak data lift stimulus hopes

Asian stocks tip-toed higher on Monday amid a cautious market mood as investors hoped for stimulus to support growth in the world's major economies.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.1 per cent. The Shanghai Composite Index was up 0.4 per cent. Australian stocks edged up 0.1 per cent, South Korea's KOSPI rose 0.7 per cent and Japan's Nikkei was up 0.4 per cent. The Dow rose 0.25 per cent and the S&P 500 edged up 0.1 per cent on Friday.

Global equity markets received a lift after China's central bank said on Friday it was reducing how much cash banks must hold in reserve, releasing liquidity to shore up an economy slowed by the US-China trade conflict.

Underlining the need for more stimulus, data on Sunday showed China's exports unexpectedly fell in August as shipments to the United States plummeted.

Risk sentiment was also fortified as Federal Reserve Board Chairman Jerome Powell said Friday that the central bank would continue to act “as appropriate” to sustain economic expansion in the world's biggest economy.

Broader stock market gains were tempered in the wake of lacklustre economic data — US job growth slowed more than expected in August — although even this was seen as a positive factor for equities.

“Equities usually respond negatively to soft data. But the fact that the US jobs report shows the market is banking on stimulus, expecting the Fed to respond to economic weakness with rate cuts,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

Buoying market confidence on Monday were expectations that the European Central Bank would cut interest rates on Thursday. “The equity markets will receive a further lift and consolidate their recent gains if they can confirm the ECB's dovish stance,” Ichikawa at Sumitomo Mitsui DS Asset Management said.

The dollar was capped as US yields came off two-week highs after Friday's soft US jobs report also raised expectations for a Fed rate cut. The greenback traded at 106.840 yen, off the one-month peak of 107.235 scaled late last week.

The euro was steady at $1.1025, weighed down ahead of Thursday's ECB policy decision and near a 28-month low of $1.0926 set last week. The Australian dollar, sensitive to shifts in broader risk appetite, hovered near a five-week peak of $0.6862 set on Friday.

The pound was little changed at $1.2282. Sterling has bounced from a three-year low set a week ago as the threat of Britain leaving the European Union without a deal on October 31 was seen to diminish. But political uncertainty remains, preventing the pound from regaining further ground. British lawmakers will on Monday vote on whether to hold an early election.

The 10-year US Treasury yield was at 1.5670 per cent after bouncing to 1.6080 per cent on Friday, its highest since Aug. 23.

Brent crude oil futures gained 0.5 per cent to $61.85 per barrel after Saudi Arabia signalled that production cuts will continue under a new energy minister.

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