Asia Markets Rally on Reports of China's 2 Trillion Yuan Market Rescue Plan

Shares across Asia experienced an upswing, prominently led by gains in Hong Kong and Shanghai, fueled by unconfirmed reports suggesting China's intention to inject approximately 2 trillion yuan (equivalent to $278 billion) to support its struggling markets.

According to an undisclosed Bloomberg report, China is considering accessing offshore funds held by state-owned enterprises and local funds as part of this proposed rescue plan. The news resonated positively in the markets, with Hong Kong's Hang Seng surging by 3.2% to reach 15,434.69, and the Shanghai Composite index rising by 0.7% to close at 2,776.06.

Shanghai had experienced a recent setback due to investor disappointment over China's decision to maintain the loan prime rate despite concerns about the economic outlook. The benchmark in Shanghai had fallen by 2.7% on the preceding Monday, trading at its lowest levels since 2019. As of the latest update, the Hang Seng had observed a 12% decline in the year.

Despite the potential positive impact of a substantial rescue plan, market analysts express caution, emphasizing that the plan must instill confidence to sustain market stability. Tan Boon Heng of Mizuho Bank notes that China's ongoing market sell-off persists despite the global equity rally, creating a widening divergence rather than a convergence.

In other Asian markets, Tokyo's Nikkei 225 index relinquished earlier gains, closing 0.1% lower at 36,517.57. The Bank of Japan, acknowledging "extremely high uncertainties surrounding economies and financial markets," declared its commitment to maintaining an ultra-lax monetary policy, holding the benchmark interest rate at minus 0.1%.

The Bank of Japan's policy statement also included a commitment to additional easing measures if necessary. The speculation that the Bank of Japan might end its negative interest rate policy contributed to a decline in the Japanese yen, with the U.S. dollar trading at 147.62 yen as of Tuesday morning.

South Korea's Kospi rose by 0.6% to 2,478.61, and Australia's S&P/ASX 200 added 0.5% to reach 7,514.90. Bangkok's SET remained nearly unchanged.

Shifting focus to the U.S. markets, Monday saw the S&P 500 adding 0.2% to reach 4,850.43, while the Dow Jones Industrial Average surpassed 38,000 points with a 0.4% increase to 38,001.81. The Nasdaq composite gained 0.3% to close at 15,360.29.

Notable movements in U.S. stocks included Macy's climbing by 3.6% after rejecting a buyout offer, SolarEdge Technologies rising by 4% despite announcing a 16% workforce reduction, and NuStar Energy jumping 18.2% following Sunoco's acquisition announcement valued at $7.3 billion, including debt.

However, Archer Daniels Midland experienced a significant setback, with a 24.2% drop after putting its chief financial officer on leave amid an investigation into accounting practices. ADM also anticipates reporting profits for the full year of 2023 below analysts' forecasts.

Looking ahead, the week is poised for a flurry of corporate earnings reports for the last quarter of 2023, featuring around 70 companies from the S&P 500, including American Airlines, Intel, Procter & Gamble, and Tesla.

On Thursday, the government is scheduled to release its first estimate for the economic growth in the last quarter of 2023. Economists anticipate continued growth, albeit at a slower pace than the summer months, aligning with the Federal Reserve's desire to avoid excessive economic strength that could contribute to inflation.

Friday will bring the latest reading for the preferred inflation gauge of the Federal Reserve. Economists expect the reading to show inflation remaining steady at 2.6% in December compared to the previous month.

Treasury yields, a significant market indicator, have eased since October on expectations of upcoming rate cuts. As of early Tuesday, the 10-year Treasury yield was at 4.09%, down from 4.13% late Friday and a notable decrease from the 5% observed in October.

In the commodities market, U.S. benchmark crude oil rose by 9 cents to reach $74.85 per barrel on the New York Mercantile Exchange. Brent crude, the international standard, increased by 6 cents to hit $80.12 per barrel.

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