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China stocks gain on growing signs of economic recovery

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Stocks across the Asia-Pacific region rose on growing signs that a recovery in China’s economy from the coronavirus pandemic could be gathering pace.

In early trading on Thursday, mainland China’s CSI 300 of Shanghai- and Shenzhen-listed stocks was up 0.8 per cent, taking its gains from this week’s rally to about 7 per cent. Hong Kong’s Hang Seng index added 0.5 per cent to inch further into bull market territory. 

China’s onshore-traded renminbi strengthened past the important seven to the dollar marker for the first time since March, reaching 6.9941 to the greenback.

The positive sentiment in China’s markets followed growing indications that consumer demand in the world’s number two economy was rebounding. Official data showed that consumer prices rose by 2.5 per cent year on year in June, in line with a poll of economists by Bloomberg. Factory gate deflation also eased during the month, with prices falling 3 per cent year on year compared with expectations of a 3.2 per cent decline. 

“With fiscal stimulus and infrastructure spending still ramping up, we think that economic activity and producer prices are set to recover further in the coming months,” said Martin Rasmussen, China economist at Capital Economics.

Overnight on Wall Street, the S&P 500 closed 0.8 per cent higher following a final hour rally while the tech-heavy Nasdaq Composite added 1.4 per cent. That was despite concerns over a resurgence in Covid-19 cases in US states including Texas, Florida and California.

US authorities reported a record one-day jump of 62,000 new infections on Wednesday in a sign that reinstated lockdown measures may have failed to dampen the current outbreak.

Futures trading suggested the American benchmark would open 0.1 per cent higher later in the day. London’s FTSE 100 was tipped to rise 0.6 per cent.

Elsewhere in Asia, Japan’s Topix slipped 0.3 per cent despite data showing that machinery orders edged higher in May compared with the previous month. The yen was slightly weaker at ¥107.34 per dollar.

Australia’s S&P/ASX 200 was 0.8 per cent higher and South Korea’s Kospi gained 0.5 per cent.

Commodity prices were little changed. Brent, the international crude benchmark, rose 0.2 per cent to $43.36 per barrel and West Texas Intermediate, the US marker, was flat at $40.89 per barrel. Data from the Energy Information Administration overnight showed that US crude stockpiles nudged higher to 539m barrels in the week to July 3.

Gold, the haven asset that hit a nine-year high on Wednesday, was unchanged at $1,820.80 per troy ounce.

The yield on US 10-year Treasuries, also viewed by investors as a haven during times of uncertainty, slipped 0.01 percentage point to 0.653 per cent. Bond prices rise as yields fall.

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