Asian shares rise after Powell speech; stronger yuan lifts China

ASIAN SHARES rose on Monday, taking heart from comments by the Federal Reserve chairman that drove Wall Street to record highs on Friday, and as a tweak to the way China’s central bank manages its currency boosted the yuan and stocks. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.1%, while Japan’s Nikkei stock index closed 0.9% higher.

SHANGHAI — Asian shares rose on Monday, taking heart from comments by the Federal Reserve chairman that drove Wall Street to record highs on Friday, and as a tweak to the way China’s central bank manages its currency boosted the yuan and stocks.

MSCI’s broadest index of AsiaPacific shares outside Japan was up 1.1%, while Japan’s Nikkei stock index closed 0.9% higher.

European share markets were set to follow Asia higher, with European spreadbetters expecting Germany’s DAX to gain 45 points to 12,439 and France’s CAC 40 expected to open 22 points higher at 5,454.

Adding to the positive mood, US and Mexican trade negotiators appeared close to reaching a common position on the North American Free Trade Agreement (NAFTA), with Mexican Economy Minister Ildefonso Guajardo saying on Sunday that talks have “continued to make progress.”

A prospective trade deal with Mexico “takes a little bit of global trade war risk off the table,” said Robert Carnell, chief economist and head of research, Asia-Pacific at ING. “Every time there’s a move toward fewer tariffs from the US instead of more, then that should take a little pressure off the US dollar.”

In China, shares rose to their highest levels in two weeks.

The Shanghai Composite index added 1.7% and the blue-chip CSI300 index surged 2.2%, after the People’s Bank of China late on Friday revived a “counter-cyclical factor” used to set the midpoint of the daily trading band of the yuan, in a bid to support it.

The move raised hopes that a yuan recovery could boost companies with significant dollar-denominated costs, such as airlines. China Southern Airlines gained 4.4% and Air China rose 3.7%.

The yuan hit a two-and-a-halfweek high against the US dollar in early trade on Monday as the PBOC set the day’s midpoint at a stronger-than-expected level. At 0554 GMT, the yuan was trading at 6.8137 per dollar, 53 pips stronger than Friday’s onshore close of 6.8190.

“China just seems to be stabilizing its currency and we’re getting used to that fact now, so we’re not looking at an everweaker CNY, which could raise issues,” said Mr. Carnell, adding that “it reduces the scope for outflows.”

Among other Asian markets, Seoul’s KOSPI index ended up 0.3%.

On Friday, the S&P 500 index and Nasdaq Composite hit record highs, following comments from the chairman of the US Federal Reserve, Jerome Powell, who said a gradual approach to raising rates was best to protect the US economy and job growth.

S&P 500 E-mini futures touched a record high of 2,885 on Monday morning in Asia, and were last 0.2% higher at 2,883.

“Powell’s Jackson Hole speech essentially confirmed the need for further gradual rate hikes and stressed that higher interest rates have served the economy well,” ANZ analysts said in a note on Monday. —