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Hang Seng up 1%; CSI300 up 2%

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China bond yields hit record lows

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Aussie dollar steady ahead of RBA rate decision

By Tom Westbrook

SINGAPORE, Dec 10 (Reuters) - China stocks surged and

commodities and the Australian dollar found support on Tuesday

on Beijing's new promises of rate cuts and a boost to

consumption, while global stocks were wobbly ahead of a crucial

U.S. inflation reading.

Australia's central bank is expected to leave its cash rate

on hold at 4.35% later in the day. Overnight the S&P 500

fell 0.6% and futures dipped 0.1% in the Asia morning.

A 2.5% drop for chip titan Nvidia ( NVDA ), which edged a

fraction lower still in after-hours trade following China

opening an antitrust investigation, weighed on the mood.

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

rose 0.3%, led by a 1% gain for the Hang Seng

index and a 2% rise in the blue chip CSI300

index.

Japan's Nikkei rose 0.4%.

A readout from China's Politburo on Monday had already

spurred a late surge in Hong Kong stocks and sent yields on

Chinese government bonds to record lows on bets there is help at

hand to lift sluggish spending and economic growth.

State media outlet Xinhua reported the top Communist Party

officials had shifted the monetary policy stance from "prudent"

to "moderately loose," mirroring their response in previous

crises, and would stabilise markets and "vigorously" boost

consumption.

"The statement signals potential rate cuts, fiscal expansion

and asset buying ahead," said analysts at ANZ in a note, though

with the magnitude unclear and further details possibly coming

later in the week from the Central Economic Work Conference.

The stocks rally lifted China's major indexes to one-month

highs with consumer shares notching large gains.

But the runaway rally in Chinese bonds, which extended on

Tuesday to drive 10-year and 30-year yields

to record lows suggests some investors doubt the

measures are going to lift long-run growth in China.

"In the past demand for credit outstripped supply, making it

straightforward for the PBOC to boost credit growth by cutting

policy rates," said Julian Evans-Pritchard, head of China

economics at Capital Economics.

"By contrast, there is now limited appetite among households

and large parts of the private sector to take on more debt, even

at lower rates. That leaves most of the burden of stimulating

the economy on fiscal policy."

WAITING ON CPI

Australia's currency caught a boost from China's

policy shift, as did iron ore miners, with Fortescue up

almost 7% and Rio Tinto rising more than 5%.

Traders left the Aussie broadly steady at $0.6428 ahead of

an 0330 GMT policy decision from the Reserve Bank of Australia.

With no change expected, focus was on the tone and media

conference at 0430 GMT for guidance around inflation and the

bank's next policy move.

The U.S. consumer price report is out Wednesday and the core

is seen holding at 3.3% for November, which should be no

impediment to an easing. Interest rate futures imply an 85%

chance of a rate cut next week is priced in by the market.

Traders are also expecting rate cuts in Europe and Canada

later this week and are leaning towards a cut in Switzerland as

authorities may like to tap the brakes on the franc's relentless

rise against the euro.

The euro traded at $1.0548 and 0.9272 francs. The

Japanese yen, which was the best-performing G10

currency in November as expectations have grown for a December

rate hike in Japan, was a fraction weaker at 151.45 per dollar.

Positioning data shows speculators flipped to a long yen

position last week for the first time in more than

a month.

Oil prices rose on Monday on the news of China's policy

plans and as the sudden fall of Syrian President Bashar al-Assad

highlighted instability in the Middle East and geopolitical

risk.

Brent crude futures were steady at $72.15 a barrel

in early trade on Tuesday. Gold hovered at $2,664 an

ounce while bitcoin fetched $98,040.