(Bloomberg) — Asian shares advanced after a slew of positive headlines from China supported sentiment. The dollar held steady as the clock ticked down toward a close U.S. election.
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China’s stock benchmarks rose about 2% to lead the region’s earnings. Japan’s Nikkei 225 rose after a holiday, while shares in Australia and South Korea fell. The Bloomberg Dollar Spot Index was flat and 10-year Treasury yields rose one basis point.
After a cautious start to the day, stocks moved higher on data showing China’s services activity grew at its fastest pace since July and comments from the prime minister that the country has ample policy space. Sentiment also got a boost after the country’s top legislative body reviewed a proposal that aims to reduce the financial burden on local officials.
This week the focus is more on the US presidential elections, as polls show Americans are closely divided between Donald Trump and Kamala Harris. The likelihood of a contested outcome could delay the vote count for weeks, potentially increasing volatility.
“It would definitely make a lot of sense for the Chinese government to keep some of their stimulus powder dry as they wait and try to understand what’s going to happen from the United States,” said James Sullivan, head of APAC equity research at JPMorgan. Securities Singapore, told Bloomberg TV. “There is more to a Trump victory than a Harris victory.”
There are other catalysts likely to move the market this week. Election Day will be quickly followed on Thursday by the Federal Reserve’s decision and Jerome Powell’s press conference, where he will provide details on the central bank’s interest rate path. A large portion of American companies will report earnings figures.
“The U.S. dollar is probably the cleanest expression, the most obvious expression for this week,” Chris Weston, head of research at Pepperstone Group, told Bloomberg TV. A Harris win combined with a divided Congress justifies selling off the US currency, while “if we get a Trump win, you’ll probably see a little bit of a pop in the dollar, 1% or 2% or so over a day or two. .”
Elsewhere, Australia’s central bank left its key interest rate unchanged at 4.35%, as expected, leading to limited market reactions. The board emphasized the “high degree of uncertainty” about the international outlook.