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Asia-Pacific Shares Boosted by Government Stimulus Expectations

James Hyerczyk

The major Asia-Pacific stock indexes are mostly higher on Tuesday, bucking the trend set by Wall Street on Monday. Stocks in the U.S. posted their worst day since the 2008 financial crisis with the selling primarily fueled by a shocking plunge in crude oil prices.

Asia-Pacific shares posted steep losses in Monday’s session in reaction to the oil sell-off. Today’s strength represents optimism that the coronavirus outbreak will eventually be contained, and that governments stand ready to implement fiscal stimulus to prevent a global recession.

On Tuesday at 05:34 GMT, Japan’s Nikkei 225 Index is trading 19859.44, up 160.68 or +0.82%. Hong Kong’s Hang Seng Index is at 25535.91, up 495.45 or +1.98% and South Korea’s KOSPI Index is trading 1958.76, up 3.99 or +0.20%.

China’s Shanghai Index is trading 2993.91, up 50.62 or 1.72% and Australia’s S&P/ASX 200 Index is at 5939.60, up 179.00 or +3.11%.

Monday Recap

Investors dumped stocks in reaction to new developments on the global spread as well as an oil price war that was triggered after OPEC and its allies failed to reach a deal on production cuts, and Saudi Arabia announced massive discounts to its official selling prices for April.

The steep plunge in stock prices prompted investors to move money into the global benchmark U.S. Treasury notes, pushing its yield to an all-time low of 0.318%, adding another 30 basis points to an unprecedented fall in the key interest rate.

The 30-year Treasury yield also hit a record low of 0.702%, breaching the 1% threshold for the first time in history.

Investors Betting on Government Stimulus

Tuesday’s early strength is being fueled by rising yields in the United States, Germany and Japan. This suggests a “risk-off” theme may be developing. The catalysts behind the move may be speculation that the governments within the Group of Seven nations are planning to announce stimulus measures.

In the United States, President Trump announced on Monday he will be meeting with Senate and House Republicans on Tuesday to discuss a “possible tax relief measure” in response to the coronavirus outbreak stateside.

In Japan, Finance Minister Taro Aso said the country’s government is set to unveil a second package of steps on Tuesday to tackle the coronavirus outbreak, Reuters reported.

China Inflation Data Mixed

On the economic data front, producer prices in China fell 0.4% from a year earlier, Reuters reported Tuesday citing official data. That was far worse than expectations of a 0.3% decline by analysts in a Reuters poll. Consumer prices rose 5.2% as compared to a year earlier, in line with forecasts by economists polled by Reuters.

This article was originally posted on FX Empire