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Chinese Stocks Lead Asian Shares Higher

Shanghai stocks led Asian stock markets higher on Tuesday as China boasted fiscal action to support the world’s second largest economy.  Meanwhile, strong results from internet giant Alphabet buoyed the technology sector generally.

stocks trading and a hand on a tablet pointing at price movements

Global bonds stayed under pressure on the speculations that the Bank of Japan may soon fall back from its massive stimulus.  In China, government bond yields jumped, while the offshore yuan reached a one-year low after China’s cabinet stated that it would pursue a more aggressive fiscal policy.  Traders are increasingly betting on further easing in monetary conditions.

Shanghai blue chips gained 1.5 percent to a one-month high.  The MSCI’s broadest index of Asia-Pacific shares excluding Japan added 0.6 percent.

The better mood supported Japan’s Nikkei, which crept up 0.5 percent, even though a disappointing reading on factory activity indicated that the threat of trade war was starting to manifest its adverse effect on the economy.

S&P 500 e-minis were 0.2 percent firmer, while European bourses appeared to start higher in the beginning of the trade.

Technology stocks got some support from Google’s parent company, Alphabet Inc, which gained 3.6 percent after hours to reach a record high.  This valued the group at a staggering $870 billion.

This was in high contrast against Monday’s lackluster performance wherein Wall Street’s Dow finished the session down 0.06 percent, while the S&P 500 jumped 0.18 percent while the Nasdaq increased 0.28 percent.

Bond bulls were still optimistic from speculation that the Bank of Japan is near the announcement of measures to scale back its extreme monetary stimulus.  This risk lifted worldwide long-term borrowing costs.

According to ANZ economist  Felicity Emmett, markets were still worried that Japanese investors would have less incentive to hunt offshore for yield.

“The 10 basis-point steepening in the Japanese yield curve is massive in the context of a market that rarely moves more than 1 basis point,” Emmett stated.  “It reflects a broader fear that central banks are reducing their purchases while US bond supply is set to rise significantly.”

Consequently, 10-year US Treasury yields reached their highest in five weeks near 2.96 percent.  They were once again closing in to the psychological barrier of 3 percent.

One likely cause of the shift in yields was the talk that the data on second quarter US economic growth in GDP, which is due to be released on Friday, would easily beat the current predictions of 4.1 percent.

The US dollar index, which measures the strength of the greenback against a basket of six other major currencies around the world, was hovering near 94.697.

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