EU activity, Fed pledge may lift HK stocks

Hong Kong stocks are expected to rise with global markets on an expansion in the Euro zone’s business activities last month and the US Federal Reserve’s assurance to cut interest rates this year.

Euro zone business activities expanded in March for the first time since May 2023 but the recovery was uneven with a stronger-than-expected upturn in the bloc’s dominant services industry offsetting a deeper downturn in manufacturing, a survey showed.

HCOB’s composite Purchasing Managers’ Index for the currency union, compiled by S&P Global and seen as a good gauge of overall economic health, climbed to 50.3 in March from February’s 49.2, improving on a preliminary 49.9 estimate.

The bounce moved the index back above the 50 mark separating growth from contraction.

“Finally some good news again. The service sector in the euro zone is gradually finding its footing, with activity stabilizing in February and showing signs of moderate growth in March,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The services PMI rose to 51.5 from 50.2, above the estimate of 51.1 and its highest reading since June.

Meanwhile, an account of European Central Bank officials’ latest policy meeting showed they saw enough convincing evidence last month to conclude that the time for interest-rate cuts has almost arrived.

This came as US Federal Reserve chief Jerome Powell reaffirmed that the central bank is on track to cut interest rate cuts this year.

The Hang Seng Index closed 1.2 percent lower to 16,725 points on Wednesday but saw its futures rise 0.7 percent yesterday.

Elsewhere, Japan’s former top currency diplomat Hiroshi Watanabe said yesterday Japanese authorities will unlikely intervene in the currency market unless the yen plunges below 155 to the US dollar.

Markets are on alert for the chance of yen-buying intervention by Japanese authorities as the currency slides near the 152 level, where they last stepped into the market in 2022.

But Watanabe, who oversaw Japan’s currency policy from 2004 to 2007, said the chance of intervention was slim for now since the yen’s declines have been within a broad range unlike in 2022, when the currency fell more sharply.

Separately, Makoto Sakurai, a former policy board member of The Bank of Japan, said the central bank is likely to wait until fall before mulling whether to raise interest rates again.