China shares gain on latest policy steps; Fed view supports dollar
Updates prices at 0457 GMT
By Kevin Buckland
TOKYO, Oct 18 (Reuters) -China stocks rose on Friday as the central bank officially launched a swap facility aimed at boosting the equity market, although shares elsewhere in Asia were mixed in the wake of data confirming a slowdown in the world's second-largest economy.
The dollar hovered close to an 11-week high versus major peers after robust U.S. economic data allowed for a more patient path of Federal Reserve easing.
The U.S. currency was also supported by recent market contemplation of a potential election victory for Donald Trump, whose proposed tariffs and immigration policies are seen as inflationary. That helped gold push to a new record high.
Mainland Chinese blue chips .CSI300 were up 0.78% as of 0457 GMT, reversing early declines, after the People's Bank of China said the new Securities, Fund, and Insurance Swap Facility would start operating that day.
The PBOC also urged key financial institutions to swiftly implement policies to support the economy and capital markets, and the central bank's governor hinted at more interest rate cuts in a speech to a financial forum.
Beijing unveiled the biggest stimulus since the pandemic late last month, but investors have been frustrated by the lack of details offered by Chinese authorities in subsequent briefings.
Data released on Friday showed China's economy expanded at the slowest pace since early 2023 in the third quarter, and new house prices sank at the fastest clip since 2015.
While China's economy is still struggling, fourth quarter data could show some improvement and possibly allow China to achieve its 5% target for this year, according to Vasu Menon, managing director of investment strategy at OCBC.
"China clearly needs a lot more fiscal and monetary stimulus, and markets are waiting with bated breath for details," he said.
Hong Kong's Hang Seng .HSI traded 1.36% higher, getting an additional lift from technology shares following solid earnings a day earlier at Taiwanese chipmaker and Nvidia supplier TSMC 2330.TW. Taiwan's equity benchmark .TWII climbed 1.84%.
However, Australia's benchmark .AXJO sagged 0.89% and South Korea's KOSPI .KS11 slipped 0.66%. Japan's Nikkei .N225 gave up early gains to be flat.
The U.S. dollar index =USD, which measures the currency against six rivals including the yen and euro, eased to 103.65, after climbing to 103.87 on Thursday for the first time since Aug. 2.
Overnight, data showed U.S. retail sales rose a stronger-than-expected 0.4% last month after an unrevised 0.1% gain in August. A separate report showed initial jobless claims dropped by 19,000 to a seasonally adjusted 241,000 last week.
Traders now see 73.7% odds of 50 basis points of interest rate cuts over the Fed's remaining two meetings this year, down from 85.6% odds a day earlier, according to CME Group's FedWatch Tool.
The 10-year U.S. Treasury yield US10YT=RR stood at 4.0946%, little changed from Thursday, when it jumped 8 basis points.
"Robust retail sales data provided the Federal Reserve with greater flexibility in its rate path," said James Kniveton, senior corporate FX dealer at Convera.com.
"Unlike the euro zone, the Fed does not need to adjust policy to support the economy."
The European Central Bank cut rates by a quarter point on Thursday, as expected, and four sources close to the matter told Reuters that policymakers were likely to cut again in December.
The euro EUR=EBS added 0.08% to $1.0839 after sliding to $1.0811 in the previous session, the lowest since Aug. 2.
Sterling GBP=D3 gained 0.09% to $1.30225.
The dollar eased 0.3% to 149.78 yen JPY=EBS, after jumping to 150.32 yen overnight, piercing the psychological 150 barrier for the first time since Aug. 1.
Democratic presidential candidate Kamala Harris' edge over Republican Trump has narrowed from a late September lead of seven points to just three, Reuters/Ipsos polling shows. And the rivals are statistically tied in the seven crucial battleground states that will decide the race.
"The USD (is) well-positioned to extend its rally as it continues to price in a Donald Trump election victory," said Tony Sycamore, an analyst at IG.
Gold XAU= rose to a new record high of $2,711.90.
Crude oil futures inched higher on Friday, supported by a surprise drop in U.S. oil inventories and simmering Middle East tensions, but prices were headed for their biggest weekly loss in more than a month on worries of lower demand.
Brent crude futures LCOc1 rose 0.31%, to $74.68 a barrel, while U.S. West Texas Intermediate crude CLc1 was up 0.41% at $70.96 a barrel.
World FX rates YTD http://tmsnrt.rs/2egbfVh
Asian stock markets https://tmsnrt.rs/2zpUAr4
Reporting by Kevin Buckland; Additional reporting by Ankur Banerjee; Editing by Jacqueline Wong, Jamie Freed, Kim Coghill and Lincoln Feast.
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