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Shares in Japan and South Korea gained, while futures showed the Hang Seng Index is poised to jump more than 3% at the open. Iron ore advanced thanks to Beijing’s announcement as the country dominates demand for most metals. The Nasdaq Golden Dragon China Index, which tracks the biggest Chinese stocks in the US, surged 8.5% in its strongest gain since September.
China’s Politburo vowed to embrace a “moderately loose” strategy for monetary policy in 2025, marking its first major shift in stance since 2011. The top leaders pledged to take a “more proactive” approach on fiscal policies, stabilizing property and stock markets, while promising to “forcefully lift consumption.” Investors will now shift focus to China’s annual closed-door Central Economic Work Conference, due later this week.
The Politburo statement send a “positive message regarding household consumption,” Geoffrey Yu, a strategist at BNY said in an interview with Bloomberg Television. A drop in Chinese 10-year bond yields may have increased the urge among Beijing’s policymakers to lift expectations, he said.
Separately, manufacturers in China have begun limiting sales to the US and Europe of key components used to build unmanned aerial vehicles that have become a vital part of Ukraine’s defense. The moves are a prelude to broader export restrictions on drone parts that western officials expect Beijing to enforce in the new year, according to people who asked not to be identified.
Elsewhere in Asia, traders will continue to monitor assets in South Korea as President Yoon Suk Yeol was banned from traveling overseas. The Reserve Bank of Australia is expected to hold interest rates later Tuesday, with traders watching for possible clues to future policy moves.
US Treasury 10-year yields and the Bloomberg Dollar Spot Index were both little changed Tuesday.
Inflation Data
In the US, the S&P 500 dropped from nearly overbought technical levels, following a series of all-time highs, with traders awaiting key inflation data that will help shape the outlook for Federal Reserve monetary policy. Nvidia Corp. slid as China opened a probe over suspicions the US chipmaker broke anti-monopoly laws around a 2020 deal.
Data including Wednesday’s consumer price index will offer Fed officials a final look at the pricing environment ahead of their meeting the following week. Any indication that progress has stalled on the inflation front could well undercut the chances of a third straight reduction in rates.
“This Wednesday’s inflation data may hold the key to the Fed’s next move,” said Jay Woods at Freedom Capital Markets. “So far results have been in line with economists’ expectations and haven’t scared the market. However, an upward surprise should raise eyebrows at the Fed and could put another rate cut on pause.”
Elsewhere in commodities, gold was supported by China’s central bank adding bullion to its reserves for the first time in seven months and as concerns about the Middle East bolstered haven demand. Oil was little changed, with the prospect of Chinese demand offset by fallout from the collapse of the Syrian regime.
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