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Asian stock markets: https://tmsnrt.rs/2zpUAr4

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Asian shares trade at 2-1/2 year highs

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PBOC cuts banks' RRRs, 7-day, 14-day reverse repo rates

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Investors await US PCE data

By Stella Qiu

SYDNEY, Sept 27 (Reuters) - Chinese stocks are headed

for the best week since 2008 as Beijing rolled out a huge

stimulus package to revive the economy, lifting Asian shares to

2-1/2-year highs, while a sharp fall in oil prices bodes well

for disinflation globally.

The yen retreated to three-week lows ahead of a leadership

contest of Japan's ruling Liberal Democratic Party on Friday, as

investors looked to gauge what it could mean for the country's

rate hike path.

In the United States, the core personal consumption

expenditures (PCE) price index - the Fed's preferred measure of

inflation - is due later in the day. Forecasts are centred

around a small monthly rise of 0.2%, as markets are split on the

size of an expected Federal Reserve rate cut in November.

MSCI's broadest index of Asia-Pacific shares outside Japan

gained 1.1% to its highest level since February

2022. It was headed for a weekly gain of 6%, thanks to a huge

turnaround in Chinese shares.

China's blue chips jumped another 2.9%, bringing

the weekly rise to 14%, the most since November 2008.

Hong Kong's Hang Seng index also surged 2.7% and was

up 12% for the week, its best performance since 2009.

"Beijing seems finally determined to roll out its bazooka

stimulus in rapid succession... Beijing's recognition of the

severe situation of the economy and lack of success in a

piecemeal approach should be valued by markets," said Ting Lu,

chief China economist at Nomura.

"But eventually it is still necessary for Beijing to

introduce well thought policies to address many of the

deep-rooted problems, particularly regarding how to stabilize

the property sector, which is now in its fourth year of

contraction."

As flagged, the People's Bank of China on Friday lowered

banks' reserve requirement ratio by 50 basis points and cut the

7-day reverse repo rate by 20 bps. It also cut the 14-day

reverse repo rate by 20 bps, the second reduction this week.

Reuters reported on Thursday that China planned to issue

special sovereign bonds worth about 2 trillion yuan ($284.43

billion) this year as part of a fresh fiscal stimulus.

Commodities have had a good week on Chinese stimulus. Iron

ore prices rose another 1.8% on Friday to more than

$100 a metric ton, copper broke above the key $10,000 a ton

mark, gold hit another record, and silver hit a

12-year top.

Oil was a loser and set for heavy weekly losses on a report

that Saudi Arabia was preparing to abandon its unofficial price

target of $100 a barrel for crude as it gets ready to increase

output.

Brent futures fell 0.8% to $71.09 a barrel and

are down 4.6% for the week. That should be good for global

disinflation as central banks ramp up rate cuts, and bullish for

consumer spending.

In foreign exchange markets, the yen was the big mover on

Friday, with the dollar gaining 0.5% to 145.47 yen.

Japan's LDP, which has a parliamentary majority, will elect a

new leader in an unpredictable contest, with the result from the

ballot expected around 2:20 p.m. JST (0520 GMT).

"In overly simplistic terms, the three of the front runners

have quite different attitudes toward the evolution of fiscal

and monetary policy such that the outcome could influence

equities, JGBs and the Yen," said Ray Attril, head of FX

research at the National Australia Bank.

Treasury yields were steady in Asia, having risen overnight

on low U.S. weekly jobless claims that led markets to lower the

odds of another outsized half point rate cut from the Fed in

November to 51%, from 57% a day earlier.

Two-year Treasury yields were up 6 bps this week

to 3.6287%, while 10-year yields rose 7 bps in the

week to 3.7943%.