China gives markets another reason to cheer

A look at the day ahead in European and global markets from Rae Wee

Asian markets rallied on Thursday, defying weakness overnight on Wall Street as optimism over China’s latest stimulus measures got a fresh boost from news of a possible capital injection into its top banks.

Authorities are considering a $142 billion infusion to help big lenders, Bloomberg News reported, just two days after policymakers announced a series of measures intended to pull the country out of its deflationary funk.

While the latest moves point to a sense of urgency among the authorities as Beijing’s 5% economic growth target for the year starts to slip out of sight, investors saw reason to cheer.

After months of seemingly futile waiting by the markets, Chinese authorities finally appear to be waking up to the idea that a lot more needs to be done to get the world’s second-largest economy back on track.

China’s blue-chip index reversed early losses to trade higher after the latest news report, while Hong Kong’s Hang Seng Index rose about 2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan scaled a more than two-year peak.

That set the tone for a strong opening in Europe, with futures posting solid gains during the Asian session.

China aside, the day was already shaping up to be a busy one for global markets with a rate decision by the Swiss National Bank (SNB) due alongside a series of speeches by Federal Reserve and European Central Bank officials.

The SNB is expected to ease rates by 25 basis points, marking its third straight meeting of cuts.

Needless to say, the focus will be on policymakers’ guidance on their respective rate outlooks, with those at the ECB likely to maintain a less hawkish posture on rate cuts compared with their U.S. counterparts.

Key developments that could influence markets on Thursday:

– Swiss National Bank rate decision

– Speeches by Fed, ECB policymakers

– U.S. weekly jobless claims

(By Rae Wee; Editing by Edmund Klamann)