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By Swati Pandey
SYDNEY (Reuters) – Asian stocks rallied on Monday as investors sighed with relief after encouraging Chinese data suggests the world's second-largest economy could begin to stabilize thanks to stimulus measures put in place by Beijing. .
Economic growth in the second quarter slowed to 6.2% in the second quarter from the previous year, the lowest pace in at least 27 years, while separate data show that the country's industrial production and retail sales far exceeded expectations.
Promising monthly activity data suggest that a multitude of stimulus measures on the part of China have been able to support domestic activity and offset some of the damage caused by prolonged trade war with the United States, analysts said.
Chinese data suggested tensions in the stock markets, with some speculating that Beijing may temper stimulus further.
The largest MSCI index of Asia-Pacific shares outside Japan shed its losses, which rose 0.2%, to 526.72 points. It dropped by just over 1% last week after five consecutive weeks of gains.
Trade should be light, Japan being closed for a holiday.
Australian stocks fell 0.4%, while South Korea's KOSPI was essentially stable. Chinese equities reduced their initial losses with the first-order index, up 0.4%. Hong Kong's Hang Seng index added 0.3%.
"Investors could reduce their expectations, based on current data, while tax measures seem to work," said Frances Cheung, a Westpac analyst.
"That being said, we believe the PBoC will continue to support liquidity – expect stable returns and any temporary downtrend expressed through trading."
Later in the week, US retail and industrial production data will provide more clues to the health of the world's largest economy. The US Federal Reserve will release on Wednesday its "Beige Book", in which investors will be on the lookout for comments on the impact of trade tensions on business prospects.
In the currency markets, the Australian dollar, which often acted as a liquid proxy for the Chinese yuan, surged after the data, peaking at $ 0.7033, a level not seen since July 4.
The greenback was a little higher at 96,871 compared to a basket of major currencies. The dollar index fell for three consecutive days as markets fully anticipated a 25 basis point (bps) cut in US interest rates. There is also a low probability of a 50 bp cutoff.
Against the Japanese yen, the dollar hit a high close to its lowest level since the beginning of June at 108.04%, while the single currency was slightly lower at 1.1267 dollars after three sessions of successive gains.
Expectations that the Fed will maintain its favorable rates have pushed the US Treasury bonds to recover over 10 years under the current range of Fed rates ranging from 2.25% to 2.2%.
"The rhetoric of the Fed according to the Dovish made the reduction of the interest rate in July, in the eyes of the market, as a fait accompli: it's not if they cut, but by how much," said Morgan Stanley's quarterback Hans Redekar on a note.
Redekar said the bank was returning to its short dollar / yen long position.
"If the markets are disappointed, the yield curve should flatten, the US dollar strengthen and financial conditions tighten, and these factors would exacerbate the already formidable hurdles facing the global economy," he said. -he adds.
"Global reflation requires a lower USD to support world trade and commodity prices."
Concerns over global growth and low inflation have pushed investors to accumulate money on bonds and money market funds, said Jefferies, citing his global tracker of asset flow .
"The danger is that with a mountain of cash in money market funds, a commercial ceasefire would bring about a drastic change in safe assets," said Sean Darby, Jefferies global equity strategist.
"At the moment, investors do not seem particularly eager to buy stock.Revisions of results have not yet reached their low point, while the economic surprises are rare", he added.
"The bottom line is that we take a break from the risk gathering."
In commodities, US crude lost 31 cents to 59.90 dollars a barrel. Brent was down 22 cents to $ 66.50.
Gold slid to 1,410.01 ounces, squeezing from a record high of $ 1,438.60 in six years.
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