Hong Kong: Financial markets were rejuvenated after an ECB meeting announced a bigger than expected bond-buying program, which lifted US futures and helped the Stoxx Europe 600 Index cut losses.

“The envelope for the pandemic emergency purchase programme (PEPP) will be increased by €600 billion to a total of €1,350 billion,” the ECB said in a post-meeting statement after it kept interest rates steady. 

“In response to the pandemic-related downward revision to inflation over the projection horizon, the PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households.”

Forecasts for the bond buyback had varied from 300-400 billion euros (BofA Securities) to 500 billion euros expected by Capital Economics. The final programme size blew away those estimates.

The European Stoxx 600 index turned marginally positive following the announcement after it had spent the morning in negative territory. S&P 500 and Nasdaq 100 futures also cut losses to trade unchanged.

US-China airlines spat

Ahead of the meeting Asian markets had paused awaiting the size of the buyback programme and to see how US responds to China’s move to de-escalate airline spat with the US. Beijing said foreign airlines blocked from operating in the country over virus fears would be allowed to resume limited flights, following US plans to ban Chinese carriers.  

The sharp rally that followed the announcement of numerous stimulus measures announced by governments and central banks, had begun to lose momentum as economic realities begin to bite. Oil prices fell over concerns the demand recovery was weak and doubts about supply cuts by major producers.

Brent fell 1.45% and WTI dropped 2.1%.

“Broadly speaking, our view is that the macro narrative will transition from the tailwinds created by the now fully priced stimulus measures implemented — along with the reopening of the global economy — to one focused on headwinds created by a second wave of economic stress, which is amplified by heightened geopolitical risks and a near-term slowing of both monetary and fiscal support,” Manulife global chief economist and global head of macroeconomic strategy Frances Donald, said.

Japan’s Nikkei 225 index edged up 0.36% off an early peak, while the Korean Kospi index added 0.19% and Australia’s ASX200 index advanced 0.84%.

Hong Kong’s Hang Seng benchmark shrugged off its early weakness and added 0.17%, while China’s mainland benchmark CSI300 eased marginally as investors monitored tensions between the US and China.

“Despite the recent deterioration in relations, market sentiment remains upbeat with investors choosing to focus on hopes for an economic bounce and better-than-expected but still dismal economic data reports,” ING Bank economists said in a note. 

“Data reports for Thursday will focus on trade data out from the region and the US with the risk rally possibly intact as investors opt to look past risks associated with a possible US-China trade war and the civil unrest in the US.”  

Credit markets remain firm with the Asia IG index moving in by 2bps to 90/92 and sovereign CDS 2-10 bps tighter. The primary market remains busy with Zhenro PropertiesNan Hai CorpKEPCOPTT Exploration and Seazen Group announcing bond issues.

Also on Asia Times Financial:

China leads world economic recovery

A boom year for China bonds and brokers

Billions invested in NE China FTZ

Foreign Exchange: As risk-off mode sets in, dollar declines halts, yuan steady

Asia Stocks

· Japan’s Nikkei 225 climbed 0.36%

· Australia’s S&P ASX 200 advanced 0.84% 

· Hong Kong’s Hang Seng index edged up 0.17%

· The MSCI Asia Pacific index added 0.25%.

Stock of the day

Property management company Ever Sunshine Lifestyle Services fell as much as 5.5% after the company said it had placed shares accounting for 8% of its capital at a discount of 7%. The placement would also result in the directors’ stake declining from 61% to 56%.

This report appeared first on Asia Times Financial

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