Asian shares rise in nervous trade after China rate cut

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HONG KONG: Asian stocks rose on Wednesday after an interest rate cut in China helped to restore confidence in the world’s number two economy, although dealers warned markets remained on edge after this week’s global selloff.

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The dollar edged up in Tokyo, extending a rebound from this week’s heavy losses as China’s move to cut rates and free up cash for banks to lend spurred optimism.
Tokyo surged 3.20 percent, or 570.13 points, to close at 18,376.83, rebounding after Japanese shares saw their worst two-day plunge since 2011, while Seoul rose 2.57 percent, or 47.46 points, to 1,894.09.

Sydney closed up 0.60 percent, or 30.65 points, at 5,167.89, while Shanghai gained 1.58 percent in afternoon trading after heavy swings, and Hong Kong rose 0.11 percent.

“A certain calm has descended on Asian markets today, allowing traders to catch a much-needed breath,” said Chris Weston, chief market strategist at IG Markets.

Although he cautioned that volatility could easily return “and a quick one-two percent move in US futures, Nikkei, ASX 200 or Hang Seng could materialize at any time” if
confidence faltered.

China on Tuesday cut its key interest rate and slashed the amount of money banks must hold in reserve for the second time in two months in a bid to spur growth and end its worst stock market rout in decades.

The People’s Bank of China has cut interest rates five times since November to spur the slowing economy as concerns mount it may miss its seven percent growth target for the year.

‘Circuit-breaker needed’
Fears of stalling growth in China, the world’s number two economy and key driver of world growth, sparked one of the worst routs in world markets since the global financial crisis, with commodities, emerging market currencies and shares all diving.

Traders said the rate cuts had restored confidence that Beijing would act to shore up both its economy and its stocks for now, although more would need to be done to sustain the rally.

“A circuit-breaker is needed to dispel excessive pessimism and restore confidence,” Frederic Neumann, co-head of Asian economics research at HSBC in Hong Kong, told Bloomberg News.

“Further support measures in the coming weeks and months will be needed.”

In currency trade, the dollar remained under pressure at 119.56 yen, little changed from 118.84 yen in New York trade Tuesday, but dramatically weaker than the 122.06 yen seen in US trade on Friday.

The euro stood at $1.1483 and 137.30 yen in Tokyo, compared with $1.1518 and 136.87 yen in New York overnight.

Oil prices gained ahead of the latest US energy report, after plummeting to their lowest levels since early 2009 this week as investors fretted about falling demand in the face of a world supply glut.

US benchmark West Texas Intermediate for October delivery rose 28 cents to $39.59 and Brent crude for October added 29 cents to $43.50 in late-morning Asian trade.

AFP

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