China-related shares are poised for further gains following a rally sparked by support measures from Beijing, while US stocks set fresh highs as investors prepare for further rate cuts.

Equity futures point to Hong Kong’s benchmark gaining 3.6% and China’s jumping 4.6%, while the Golden Dragon index of US-listed Chinese companies rallied 9.1% in New York trading on Tuesday. The moves follow the best day since 2020 for a gauge of mainland equities after China unveiled a sweeping stimulus package to support the economy and financial markets.

Stock futures for Australia rose, while those for Japan edged lower after the yen strengthened against the dollar in the prior two sessions. The S&P 500 rose 0.3% on Tuesday to set a fresh high, while the tech-heavy Nasdaq 100 climbed 0.5%.

Support measures unveiled by Chinese authorities Tuesday included interest rate cuts, more cash for banks, bigger incentives to buy homes and plans to consider a stock stabilization fund. The efforts may only buy China some time given the scale of challenges facing the economy.

Treasury yields edged lower Tuesday as US data showed signs of fragility in the economy, while an index of greenback strength fell 0.5% to trade near the lowest level this year. A gauge of emerging market currencies set a fresh record high.

The reading on the Conference Board’s gauge of consumer sentiment posted the biggest drop since August 2021. The report also flagged concerns about a slowdown in the labor market while manufacturing data also came in weaker than expected. 

“The decay in the perceptions of jobs available was striking,” according to Carl Weinberg, chief economist at High Frequency Economics. “It also will deliver a warning message about the state of the economy to financial markets.”

Swaps traders increased their wagers to more than three-quarters of a point of policy easing by year-end, suggesting at least one more major US cut is in store, after the data. Investors are awaiting data on the Federal Reserve’s preferred price metric and US personal spending later this week for further clues on the depth of future reductions.

Fed Governor Michelle Bowman, the only policymaker to dissent on last week’s half-point cut, said the central bank should lower interest rates at a “measured” pace, in Tuesday comments. She said that inflationary risks remain and that the labor market has not shown significant weakening. 

A handful of other policymakers, including Chicago Fed President Austan Goolsbee, have said the focus needs to shift from inflation to jobs. Goolsbee said the central bank may need to cut rates “significantly.”

Oil prices climbed Tuesday on hopes of a stronger Chinese economy and as a major Israeli strike on Hezbollah targets in Lebanon kept tensions high in the Middle East. Gold hit a record trading above $2,662 an ounce.

  - Bloomberg