The question for Asian markets is whether these tailwinds offset the headwinds of higher bond yields and stronger dollar.
Improving domestic sentiment helped lift Chinese markets on Tuesday after the country’s No.2 property developer China Vanke said the impact of a Moody’s ratings downgrade on its financing activities was “controllable”.
Successfully tackling the property sector crisis is key to reviving wider economic growth, fighting off deflation, and reversing the torrent of capital outflows. It’s a tall order but the 13% rebound in Chinese stocks in the past month points to some degree of optimism.
Bank of Japan Governor Kazuo Ueda, meanwhile, cooled some of the bubbling optimism on Japan’s economy on Tuesday, telling lawmakers that the economy was recovering but also showing some signs of weakness.
The slightly bleaker remarks come ahead of the BOJ’s policy meeting next week where the board will debate whether the outlook is bright enough to phase out its massive monetary stimulus.
Ueda’s remarks helped push the two-year Japanese yield back from its 13-year high, while the yen had its biggest fall in a month.
