Trading Insight: Asian stocks rally on China’s support for stocks, USD pulls back

• Shanghai composite index jumps 2.30%, Nikkei climbs 1.73%, CSI 300 advances on China’s levy cuts for domestic stocks.
• Fed Powell, ECB Lagarde and Australia’s RBA reaffirm inflation targets and data dependency. Australia retail sales for July beats estimates.
• China manufacturing PMI, inflation data and US job data on this week’s agenda.
• China cuts stamp duty, stocks rally before pulling back

Chinese stocks received a boost in the Asian session, after regulators announced measures to restore confidence in the world’s second largest economy.

The measures include:

• Reducing the stamp duty charged on domestic equities from 0.1% to 0.05% - effective today, 28 August 2023.
• Lowering the margin ratios for leverage trading by 20% (from 100% - 80%).
• Slowing the pace of initial public offerings (IPOs) and limiting the sale of shares for stakeholders at companies whose stock price has dropped below net asset or IPO levels.

In response to difficult market conditions that have recently weighed on the property sector and on China’s economy, the levy was as it was in 2008, when the great financial crisis rattled global markets.

After a difficult month for Asian equities, the Shanghai composite index, Nikkei 225 and CSI 300 rejoiced at the open, before edging slightly lower after gapping higher.

Asian stock indices rejoiced at the open, driving the Shanghai composite index, the Nikkei 225 and the CSI 300 higher before erasing a portion of earlier gains.

Trading Insights: Can EU, US and China share a piece of the same pie?

Economic calendar to drive price action throughout this week

While UK equities are closed for the bank holiday, Australia reported better than expected retail sales data for the month of July, coming in at 0.5% vs 0.3% estimates. The major rebound from June’s disappointing -0.8% sent AUD/USD higher, finding support above 0.64, with the 20 - day moving average providing resistance at 0.648.

AUD/USD daily chart

Chart prepared using TradingView

With a host of economic data expected to be released throughout the week, a few of the important releases that may drive sentiment and the safe-haven USD include:

• Tuesday - US consumer confidence and Jolts job openings
• Wednesday - CPI inflation data out of Australia, Germany and Spain, US ADP non-farm employment change and GDP data
• Thursday - China manufacturing PMI, US core PCE and unemployment claims
• Friday - Canadian GDP, US NFP’s, average hourly earnings, unemployment rate and ISM manufacturing PMI

The combination of the systemic risks and the future outlook for the global economy could reignite recession fears and demand for risk assets.

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