Asian equities steadied on Tuesday after China stepped up efforts to boost monetary policy support for the COVID-19 hit economy which also took a toll on the global economy.
Shares in Mainland China, Hong Kong, South Korea and Japan pared losses with the MSCI Asian Index ex Japan inched down by 2.54%.
Beijing vowed to support the economy while the People’s Bank of China also said it will promote healthy and stable development in financial markets.
The PBOC Monday cut the amount of money banks must set aside in reserve for foreign-currency holdings, effectively boosting the domestic supply of dollars.
U.S. Treasuries climbed while the dollar dipped.
The market sentiment is widely set persistent inflation and slower economic growth.
“It’s a question of what’s monetary policy going to look like and it’s super unknown,” Nancy Davis, chief investment officer at Quadratic Capital Management LLC, said on Bloomberg Television.
“For the time being, the specter of more severe restrictions in China is not being traded from the inflationary side, but rather as a detriment to the global recovery and as a demand-negative shock,” Benjamin Jeffery and Ian Lyngen, strategists at BMO Capital Markets, wrote in a note.
They added they are “less convinced that the situation will be enough to materially shift the FOMC’s aggressiveness.”
Crude oil inched down trading around $100 a barrel. Virus outlook in China which is one of the biggest importer of crude added fresh volatility to the market.
