Stocks advance on Powell comments, China cut to tax on trading

Shares in Chinese property giant Evergrande lost four-fifths of their value as they resumed trading in Hong Kong after 17 months (Bertha WANG)
Shares in Chinese property giant Evergrande lost four-fifths of their value as they resumed trading in Hong Kong after 17 months (Bertha WANG)

Global stock markets rose Monday on positive sentiment surrounding interest rates and Chinese stimulus measures.

Trading remained animated by Friday's message from US Federal Reserve chief Jerome Powell that left the door open to further rate increases, though also the possibility that policymakers have reached their peak rate at a 22-year high of 5.25 percent to 5.5 percent.

Powell appeared a lot "more optimistic," according to Jack Ablin of Cresset Capital, and this could be a sign that rates would not rise further.

While inflation is coming down, a recent run of strong economic data -- particularly on jobs -- has been seen by markets as putting pressure on the Fed to keep hiking.

The Fed's data-dependent approach makes inflation and jobs data out this week even more important before the central bank's next policy meeting in September.

If the numbers continue to show an easing in labor market tightness as well as price pressures, "then the Fed is likely done with its tightening cycle," said National Australia Bank's Rodrigo Catril.

"If the data doesn't play ball, then further tightening should be expected," he added, saying that upcoming releases are likely to set the tone for markets over the next months.

Wall Street's three main indices ended higher on Monday. The Dow and S&P 500 both added 0.6 percent, while the tech-heavy Nasdaq Composite Index advanced 0.8 percent.

In Europe, the Paris CAC 40 index briefly rose above London's blue-chip FTSE 100 for the first time since 2000, although trading was closed Monday in Britain due to a public holiday.

While the development is a further indication of the recent difficulties of the London Stock Exchange, analysts said it has no real significance given their different composition.

Asian markets mostly closed higher.

- 'Positive signal' -

Shanghai was boosted by China's decision to slash the tax paid on stock trades for the first time since 2008 as authorities battle to support the world's second-largest economy.

Officials also said they would slow the pace of new listings, which usually suck up market liquidity, following a series of pledges from authorities that failed to lift optimism.

Analysts at China International Capital Corp said the latest measures beat expectations.

"The increasing force of the policy tools will lift market confidence, amplifying the positive signal for the market," they said.

But Stephen Innes at SPI Asset Management was more skeptical about the potential impact.

"While the emergence of more accommodative measures is encouraging, the reality remains that these interventions seem somewhat fragmented, particularly within the broader context of the substantial property market downturn," he said.

The moves came as shares in troubled Chinese property giant Evergrande resumed trading in Hong Kong after a 17-month suspension for not publishing financial results.

They plunged more than 80 percent after it released its earnings Sunday showing losses of $4.5 billion in the first half of the year and just $556 million in cash assets.

Once China's largest real estate firm, Evergrande defaulted in 2021 and is saddled with more than $300 billion in liabilities, becoming a symbol of a nationwide property crisis that many fear could spill over globally.

Investors were also keeping tabs on US Commerce Secretary Gina Raimondo's talks with Chinese counterparts in the latest bid to ease trade tensions between the world's two largest economies.

Both sides agreed to set up a working group on bilateral trade and investment issues.

- Key figures around 2030 GMT -

New York - Dow: UP 0.6 percent at 34,559.98 (close)

New York - S&P 500: UP 0.6 percent at 4,433.31 (close)

New York - Nasdaq: UP 0.8 percent at 13,705.13 (close)

Frankfurt - DAX: UP 1.0 percent at 15,792.61 (close)

Paris - CAC 40: UP 1.3 percent at 7,324.71 (close)

EURO STOXX 50: UP 1.4 percent at 4,293.69 (close)

London - FTSE 100: Closed for public holiday

Tokyo - Nikkei 225: UP 1.7 percent at 32,169.99 (close)

Hong Kong - Hang Seng Index: UP 1.0 percent at 18,130.74 (close)

Shanghai - Composite: UP 1.1 percent at 3,098.64 (close)

Euro/dollar: UP at $1.0820 from $1.0797 on Friday

Pound/dollar: UP at $1.2600 from $1.2578

Euro/pound: UP at 85.85 pence from 85.82 pence

Dollar/yen: UP at 146.50 yen from 146.44 yen

West Texas Intermediate: UP 0.3 percent at $80.10 per barrel

Brent North Sea crude: DOWN 0.1 percent at $84.42 per barrel