China gains hoist Asian stocks to two-year peak

Chinese stocks led Asian markets higher on Monday as investors bet on a steady recovery for the world's No. 2 economy.

MSCI's broadest index of Asia-Pacific shares outside Japan rose by 1 percent to 2-1/2-year highs, buoyed by a 2.4-percent gain in Chinese blue chips and a 2-percent rise by Hong Kong's Hang Seng index. Japan's

Nikkei

slipped by 0.3 percent as investors fretted about corporate earnings.

"If capital is moving on relative growth rates, then China is looking quite attractive," said Chris Weston, head of research brokerage Pepperstone in Melbourne. Equities are cheap, yields advantageous and the outlook solid, he said.

"From a virus perspective as well, we're seeing concerns in Europe, while China is considered a quasi-safe haven."

The mood drove SP 500 futures up 0.2 percent and futures trade pointed toward a positive start to European trade. EuroSTOXX futures rose by 0.5 percent. FTSE futures and sterling were steady ahead of a Brexit summit later in the week.

China has returned from an eight-day National Day holiday plus Mid-Autumn Festival with investors encouraged by a robust rebound in tourism and ebbing coronavirus cases.

Qingdao City in east China's Shandong Province said on Monday it will conduct COVID-19 tests for the entire population of more than nine million over five days after a small number of new cases.

In the U.S. Midwest, infections are at record level and the World Health Organization is urging fresh curbs for Europe.

Coronavirus aid plans in the United States are also in disarray, with the Trump administration on Sunday calling on Congress to pass a stripped-down relief bill while talks on a more comprehensive proposal were again at an impasse.

"The economic fallout of COVID-19 has accelerated the relative decline of the U.S. as the world's economic engine," said ANZ chief economist Richard Yetsenga. "It is also increasing the centrality of Asia – and particularly, of China."

Chinese blue chips have gained by 17 percent this year, compared with an almost 8-percent gain by the SP 500 Foreigners' buying of Chinese government bonds hit its fastest pace in more than two years last month.

In commodity markets, oil prices were back under pressure after the resolution of an oilworkers strike in Norway and the resumption of production after a storm in the Gulf of Mexico.

Brent crude futures slipped by 1 percent to $42.41 a barrel and U.S. crude futures fell by the same margin to $40.17.

Gold held steep Friday gains at $1,929 an ounce as investors stuck with bets that U.S. stimulus would eventually arrive and drive inflation to the benefit of bullion.

The U.S. bond market is closed on Monday for Columbus Day.

(REUTERS)