Asian stocks bounce as China turns up on hopes of policy support

Shanghai: Asian stock markets bounced on Wednesday following a wobbly morning session that highlighted the lingering anxiety and uncertainty surrounding a heated trade dispute between China and the United States.
Markets in Europe and the US looked set to follow Asia higher. S&P 500 futures were 0.2 per cent higher and Dow Jones futures gained 0.5 per cent.
Financial spreadbetters expected London's FTSE to open 15 points higher, Frankfurt's DAX 5 points up and Paris' CAC 13 points higher.
In Asia, bargain hunters turned out to pick up shares on the cheap after the previous day's rout. The MSCI's broadest index of Asia-Pacific shares outside Japan jumped one per cent, after Tuesday's 2.1 per cent tumble, supported by an afternoon rebound in Chinese shares. Japan's Nikkei was up 1.2 per cent after falling into negative territory earlier in the day. South Korea's KOSPI rose one per cent.
In China, markets turned losses into gains as investors appeared to take heart from indications of government support.
The Shanghai Composite Index was 0.5 per cent higher a day after falling 3.8 per cent to a two-year low.
China's blue-chip CSI300 index gained 0.6 per cent, and the Shenzhen Composite Index rose 1.4 per cent.
Hong Kong's Hang Seng index was 1.1 per cent higher after closing down 2.8 per cent on Tuesday. The China Enterprises Index reversed losses from the morning session, rising 0.4 per cent.
In a working paper on Tuesday, China's central bank said the country should cut banks' reserve requirement ratios (RRR) to boost market liquidity, highlighting concerns over trade, a day after the central bank governor urged investors to remain calm.
"It is fair to say an RRR (cut) seems imminent... the only question is the magnitude," Sue Trinh, head of Asia FX Strategy at RBC Capital Markets in Hong Kong said in a note.
An apparent bias toward looser policy "runs counter to the regional bias toward higher rates to protect currency downside," she said, adding that growing policy divergence indicates room for the onshore and offshore yuan to depreciate.
The bounce in share markets comes despite trade tensions between the United States and China showing few signs of easing. On Tuesday, a White House trade adviser said that Beijing has underestimated the US president's resolve to impose more tariffs.
Washington threatened on Monday to impose a 10 per cent tariff on $200 billion of Chinese goods after Beijing decided to raise tariffs on $50 billion in US goods, in response to similar tariffs on Chinese goods announced Friday.
Nevertheless, the yield on benchmark 10-year Treasury notes rose to 2.9022 per cent on Wednesday afternoon after earlier falling to 2.8820.
The two-year yield, which rises with traders' expectations of higher Fed fund rates, was at 2.5535 per cent.
Australia catch-up rally
Australian stocks, which saw strong buying throughout the day, ended 1.2 per cent higher, supported by a weak local dollar. The Aussie dollar rose 0.2 per cent after hitting a one-year low on Tuesday.
A more attractive dividend proposition and a weaker Australian dollar have made the market more alluring to overseas investors, said Ryan Felsman, a senior economist at CommSec.
"Last year the Aussie market was only up 7 per cent relative to the US at 25 per cent. We didn't get the sugar hit from the corporate tax plan, so there's a bit of catch-up in play as well," he said.
The US dollar was slightly stronger against the yen, rising 0.05 per cent to 110.10.
The euro was 0.1 per cent lower at $1.1576, while the dollar index, which tracks the greenback against a basket of six major rivals, was flat at 95.096.
US crude rose 0.6 per cent to $65.43 a barrel, supported by a drop in US commercial crude inventories. But analysts said trade concerns and disagreements within the Organisation of the Petroleum Exporting Countries (Opec) over boosting supply continue to loom over the market.
Iran said on Tuesday that Opec was unlikely to reach a deal on oil output this week.
Gold was flat after falling near six-month lows Tuesday on a strong dollar. Spot gold was traded at $1273.91 per ounce.
Investors in cryptocurrencies were also hit by losses after South Korean virtual currency exchange Bithumb said it had been hacked and $32 million worth of virtual currency held at the exchange was stolen.
Bitcoin was 1.9 per cent lower at $6,607.00.