Chinese stimulus boosts global stocks, commodities to new high By Reuters

By Sruthi Shankar and Ankur Banerjee

LONDON/SINGAPORE (Reuters) – Global stocks hit a record high on Tuesday after China unveiled stimulus measures to support its economy and stock markets, sending Asian and European shares higher and triggering a rally in commodity prices.

People's Bank of China Governor Pan Gongsheng announced plans to cut borrowing costs and inject more funds into the economy, as well as ease the burden of household mortgage payments. Pan also said China would for the first time implement structural monetary policy tools to help stabilize capital markets.

The moves lifted Chinese stocks, with the CSI300 index and blue-chip index each up more than 4 percent. Hong Kong's index rose 4.1 percent to a four-month high.

“The immediate reaction is certainly positive for markets because the measures have been more forceful than the previous ones we have seen from policymakers,” said Ecaterina Bigos, chief investment officer for core investing (Asia ex-Japan) at AXA Investment Managers.

“But for us to see a sustained impact from all these measures, we need to see some support from the fiscal side as we approach the end of the year.”

Chinese stocks have lagged in Asia: the CSI300 index has fallen 2.3% this year after hitting multi-year lows as piecemeal stimulus from authorities failed to galvanise markets.

The pan-European index rose 0.6%, led by mining and luxury stocks with exposure to China. German blue-chip stocks traded just below their record highs. ()

MSCI's index of world stocks gained 0.3 percent to hit a record high. Futures pointed to a quiet opening on Wall Street. (.N)

Optimism also pushed up commodity prices, with oil prices up more than 2% to a 10-week high, helped by expectations of improved demand in top consumer China. (O/R) (MET/L)

Iron ore futures traded on China's Dalian Commodity Exchange posted their biggest intraday gain in more than a year. (IRONORE/)

Gold prices hit a record high of $2,639.95 as rising tensions in the Middle East boosted flows into safe-haven assets. (GOL/)

The RBA remains firm on its stance

The Reserve Bank of Australia kept interest rates steady, as expected, and reiterated that monetary policy should remain tight, in contrast to the US Federal Reserve, which began its easing cycle with a 50 basis point (bp) cut last week.

The Australian dollar rose 0.1% to $0.6846, having earlier touched its highest level of 2024 at $0.68695.

The U.S. dollar hit a 20-day high against the yen and continued to strengthen after the Bank of Japan signaled last week that it was in no rush to raise rates. Dollar/yen rose 0.3% to 144.06.

In a speech at a meeting with business leaders in Osaka on Tuesday, BOJ Governor Kazuo Ueda said he can afford to spend time analyzing market and economic developments abroad to set monetary policy.

Meanwhile, markets are currently split on whether the US central bank will opt for another 50 basis point cut or a 25 basis point cut in November, the CME Fedwatch tool shows. They are pricing in 76 basis points of easing this year.

Elias Haddad, senior market strategist at Brown Brothers Harriman, said the market was overestimating the Fed's ability to ease monetary policy. “However, strong US employment data will likely be needed to trigger a material upward reassessment of expectations for the federal funds rate.”

The next nonfarm payrolls report is due on Oct. 4, and until then, Haddad said a more dovish Federal Reserve and a strong U.S. economy will support market sentiment and further weaken the dollar against growth-sensitive currencies.

The , which measures the U.S. currency against six rivals, was down slightly at 100.86, not far from the one-year low of 100.21 hit last week. (FRX/)

The euro rose 0.1% to $1.1123. The single currency fell around 0.5% on Monday as weak euro zone business activity reports raised expectations for more rate cuts by the European Central Bank.