Asian equities enjoyed a broad-based rally on Monday, tracking a strong U.S. lead, with investor attention focused on developments in China. On Wall Street, stocks rallied on Friday but the S&P 500 still posted its longest weekly loss streak since 2011 following remarks from Federal Reserve officials. Chair Janet Yellen voiced concern about income inequality, while St. Louis Fed President James Bullard said on Thursday that the central bank should think about postponing the end of its bond purchases.
“We believe Friday was a positive trading sentiment day. However, the question we need to ask ourselves is whether we believe Friday signalled the floor of the market? The jury is still out. We will want confirmation on a weekly basis before we get overly excited. We’re mildly positive but cautious on Fed speak,” said Evan Lucas, market strategist at IG in a note.
Attention in Asia was on China where members of the Central Committee of the ruling Communist Party will gather for their fourth plenum. The rule of law will be a key focus at the meetings, with expectations that provincial courts will be given more independence to limit influence by local authorities. The meetings will also be watched for whether Hong Kong’s pro-democracy movement will be discussed. Police remained in a standoff with protesters on Monday following clashes and several arrests over the weekend.
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