Asian markets rose on Monday as investors welcomed Chinese plans to kickstart consumption in the world’s number two economy, though worries about Donald Trump’s tariffs war continue to cast a shadow over trading floors.
The gains follow a much-needed rally on Wall Street that was stoked by optimism US lawmakers would pass a spending bill to avert a painful government shutdown.
Eyes were on Beijing as officials were set to outline their plans to kickstart spending by the country’s army of consumers after years of post-Covid weakness that has been a major drag on economic growth.
The State Council unveiled a set of initiatives on Sunday that aim to “promote reasonable wage growth by strengthening employment support in response to economic conditions”, according to state news agency Xinhua.
The plan looks to boost income with property reforms, stabilise the stock market and encourage lenders to provide more consumption loans with reasonable limits, terms and interest rates.
Officials were also looking at raising pension benefits, establishing a childcare subsidy system, and ensuring workers’ rights to rest and holidays are legally protected.
The move comes after data showed consumer prices dropped into deflation in February for the first time in a year, while producer prices continued to drop.
However, observers warned that leaders had a tough job ahead of them amid Trump’s trade war.
“While fiscal spending targeting domestic demand has expanded, government support is limited,” said economists at Moody’s Analytics, adding that “mercurial US economic policies are set to drag on global trade and hit China”.
“With China firmly in US President Donald Trump’s sights, deflation concerns in China will worsen. The chaos of tariffs and rising unemployment will keep consumer spending weak, denting inflation’s demand drivers.
“Manufacturers will have to look closer to home to sell tariff-targeted products. That combination — weaker demand and more domestic supply — will be a handbrake on price growth.”
Data on Monday provided a little support, with retail sales up more slightly than expected last month and industrial production also topping estimates.
Hong Kong rallied more than one percent, building on a blockbuster start to the year fuelled by a chase into Chinese tech giants, while Shanghai, Tokyo, Sydney, Singapore, Seoul, Taipei, Manila and Jakarta also enjoyed healthy buying.
Gold was sitting just below $3,000 an ounce, having broken to a record high near $3,005 on Friday owing to a rush into safe havens as traders fret over Trump’s tariffs.
All three main indexes on Wall Street ended on the front foot on Friday on optimism a government shutdown would be averted. Later in the day lawmakers passed the spending bill that will keep business going through to September.
Traders are also looking ahead to the Federal Reserve’s next policy decision as policymakers try to navigate Trump’s tariffs campaign, which some economists warn could reignite inflation and tip the economy into recession.
While the bank is expected to stand pat on interest rates, it will release its summary of economic projections and its outlook for borrowing costs this year.
The gathering comes after a consumer survey released by the University of Michigan last week said expectations for the future “deteriorated” with “many consumers”. It cited a “high level of uncertainty around policy and other economic factors”.
Tokyo – Nikkei 225: UP 1.1 percent at 37,475.24 (break)
Hong Kong – Hang Seng Index: UP 1.3 percent at 24,262.21
Shanghai – Composite: UP 0.4 percent at 3,431.79
Euro/dollar: DOWN at $1.0880 from $1.0884 on Friday
Pound/dollar: UP at $1.2938 from $1.2936
Dollar/yen: DOWN at 148.59 yen from 148.62 yen
Euro/pound: DOWN at 84.11 pence from 84.14 pence
West Texas Intermediate: UP 1.1 percent at $67.91 per barrel
Brent North Sea Crude: UP 1.0 percent at $71.29 per barrel
New York – Dow: Up 1.7 percent at 41,488.19 (close)
London – FTSE 100: UP 1.1 percent at 8,632.33 (close)
