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By Wayne Cole
SYDNEY (Reuters) – Asian equities regained ground on Friday after a restless week as China signaled greater support for its economy amid rising expectations of aggressive stimulus from all major central banks.
The Chinese planner announced that Beijing would launch a plan to increase disposable income, although details were missing.
A rebound in US and European equities futures also helped, with E-Minis for the S & P 500 and EUROSTOXX 50 rising by 0.6% each.
In early European trade, Germany added 0.7%, as did futures for London and France.
The widest MSCI index of Asia Pacific shares out of Japan reacted up 0.4%, although it is still down 1% for the week.
Japan recovered its first defeats to finish on a firmer 0.06%, while those in Shanghai rose 0.3%.
"Tariffs remain the most important source of risk for equities," JP Morgan analysts said in a note.
Beijing has pledged Thursday to counter the latest tariffs of 300 billion dollars of Chinese goods.
"Existing US / Chinese rates weighed on corporate profits in years 1 and 19. The S & P 500 companies posted stable earnings growth compared to the single-digit trend rate before implementation. prices, "said JP Morgan analysts.
They also downgraded the earnings per share estimates for 2020 from $ 177 to $ 178, the latest rates likely to come into effect on September 1.
US President Donald Trump said Thursday that he believed that China wanted to reach an agreement and that the dispute would be fairly brief, even if it already lasts more than a year.
In the absence of a settlement in sight, investors have protected themselves against the global slowdown by buying bonds. The 30-year debt yields hit their all-time low of 1.916% on Thursday, down 27 basis points for the week, the biggest such decline since mid-2012.
This meant that investors were willing to lend money to the government for three decades at a price below the overnight rate.
Such is the sluggishness that surprisingly strong US retail sales come and go without impacting the bond rally.
Analysts have warned that the current bond market is a different beast from the past and may not send a real signal about the recession.
"The bond market may have been wrong this time, but we would not reject the latest signals of recession for distorting reasons," said Simon MacAdam, a world economist at Capital Economics.
"On the contrary, it is comforting for the global economy that, unlike all previous reversals of the US yield curve, the Fed has already begun to ease its monetary policy."
CAVALRY TO COME
Indeed, futures imply a one in three chance that the Federal Reserve will cut rates by 50 basis points at its September meeting and sees them only reach 1% by the end of the year. next.
There were many other signs that the cavalry was coming.
European Central Banker Olli Rehn on Thursday stressed the need for a major easing program in September.
Markets are determined to reduce the deposit rate by at least 10 basis points and resume bond purchases, bringing German 10-year yields back to a record low of -0.71%.
"The idea that the package will include a reorganized QE program has also been marked by a sharp rise in Italian, Spanish and Portuguese debt," said Tapas Strickland, director of economics at the National Australia Bank.
"If the ECB adopts such stimulus measures, it is unlikely that it will do it alone given the upward pressures it would exert on the US dollar."
Mexico has become, overnight, the last country to surprise with a reduction in rates, the first in five years.
Canada's yield curve has been the most inverted in almost two decades, prompting the Bank of Canada to take action.
All discussions on easing the ECB have overturned the euro at $ 1.1096 and surpassed the $ 1.1230 earlier this week.
It was down 0.1% to $ 1,1104, helping to climb the top of 98,217 and the low of the week to 97,033.
The dollar could make little progress on the yen hut, however, and slowed to 106.14 yen.
The collapse in bond yields continued to make non-interest-bearing gold more attractive and the metal held steady at $ 1,514.6 just after a six-year high.
Oil prices were trying to rebound after two days of heavy losses. futures contracts rose 65 cents to 58.88 dollars, while prices rose 62 cents to 55.09 dollars a barrel.
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